Why AT&T is relinquishing spectrum in Mexico

According to a number of reports, AT&T is returning some of the spectrum it purchased in Mexico back to the country's regulator, the Federal Telecommunications Institute (IFT). The move is noteworthy considering AT&T has spent billions of dollars acquiring spectrum in the US market, and continues to push US regulators to release more spectrum for 5G there.

"This transaction has been part of AT&T's spectrum portfolio strategy, where various factors have been taken into account, including the cost of spectrum. The company has previously pointed out that Mexico has one of the most expensive spectrum costs, which causes fewer people to be connected, putting investments at risk and creating barriers to competition," said a spokesperson for AT&T's Mexican business, when questioned by Light Reading about the reports.

AT&T is returning some AWS and 850MHz spectrum across Mexico, including some covering Mexico City. This would be the second time AT&T has relinquished spectrum following its decision to return 800MHz spectrum back to the Mexican government in 2020.

In explaining its decision, a representative from AT&T Mexico pointed to a recent essay by Ryan Berg, director of the Americas Program at the Center for Strategic and International Studies (CSIS). "From a public policy level, high spectrum fees set by the Mexican government present a major obstacle for telecommunications operators to expand broadband connectivity and mobile service to citizens in Mexico's most rural regions," Berg wrote earlier this year.

In Mexico, companies that buy spectrum in an auction often pay an upfront fee as well as an annual usage fee.

AT&T's move comes as the IFT prepares to auction off more lowband and midband spectrum for 5G later this year. The country's regulator has promised lower spectrum costs after holding an auction in 2021 where just 10% of the spectrum on offer was acquired.

Figure 1: (Source: Xinhua/Alamy Stock Photo)

AT&T entered the Mexican market in 2015 via the purchases of Iusacell and, later, Nextel Mexico. Since then, the company has invested several billion dollars to upgrade its network there.

At the end of 2021, AT&T Mexico said it would launch 5G in the country via its 2.5GHz holdings (the same spectrum that underpins T-Mobile's midband 5G network in the US). At the end of last year, AT&T Mexico said it would cover 25 cities in Mexico with 5G, according to RCR Wireless.

However, AT&T continues to struggle against Mexican market leader America Movil. According to Mordor Intelligence, America Movil commands 61% of the Mexican mobile market, outpacing Telefónica's 19% and AT&T's 15%. However, AT&T today counts roughly 21 million customers in Mexico, up almost 8% from a year ago. It also has a major network-sharing agreement with Movistar (Telefónica) wherein Telefónica divested much of its network and spectrum in the country in order to piggyback on AT&T's network there.

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— Mike Dano, Editorial Director, 5G & Mobile Strategies, Light Reading | @mikeddano