EconomyFinancialInflation will have secondary effects in the mobile sector

Inflation will have secondary effects in the mobile sector

The skyrocketing price rise that the country is experiencing has not reached telecommunications services. In December, the cost of the internet for users was on average 112.8 pesos, an increase of 2.5% compared to the same period in 2020, according to Inegi data. The telephone, internet and pay television packages, known as triple play, had a cost of 96.5 pesos, an increase of 0.41%, while restricted television rose 3.5%. All telecommunications service rates were below inflation, which stood at 7.36%.

The sector did register high prices during 2020 and in some sections of last year. 9.5% more than the 102.9 of 2019, the year before the pandemic, an increase above inflation, which closed October at 6.2% at an annual rate, due to the rise in demand and the need for investments, as well as the effect of inflation on business.

But although the high inflation is not reflected in the bag that consumers allocate to telecommunications services, it will hit the companies that provide the service. “This will be due to the impact at the cost level for all companies, which will cause us to see increases in rates. However, historically, price increases in this sector have not increased above inflation,” explains Brian. Rodriguez, Monex analyst.

The report ‘Hiring and Consumption Patterns of Users of Fixed Telecommunications Services before and during the pandemic’, from the Federal Institute of Telecommunications (IFT), highlights that the average cost of users for the fixed internet service is 482 pesos , while for pay television they disburse 430 pesos. For mobile services, they spend between 148 pesos and 766 pesos.

Impact on mobile telephony

With the warning of spun increases in inflation for this year, users’ pockets are increasingly under pressure, so they will have to prioritize expenses, even within telecommunications.

Gonzalo Rojón, an analyst at The Ciu consultancy, details that one of the telecommunications services that will be affected is mobile telephony in its prepaid mode, since fixed internet has already become essential to continue with work activities and the school, and pay TV, being bundled with the internet, will keep their subscriptions.

“There are certain priorities and they begin to increase certain products of the basic basket. Now you must redistribute your income according to the needs that are had and that is where people must also redistribute their spending. Where there will be a greater affectation is precisely in the recharge part. If before they recharged 100 pesos, maybe now they will recharge 80”, says Rojón.

According to data from The Ciu, 81.2% of users have a prepaid line, that is, 106.7 million Mexicans make a phone recharge to access mobile data downloads or surf the Internet on their mobile device. In addition, 35% of prepaid lines buy recharges of up to 50 pesos and 6% one of less than 30 pesos.

For prepaid lines, analysts consider that they will not be affected, since they correspond to a sector of the population that, even with inflation, can afford connectivity services.

The MVNOs, the beneficiaries

Specialists estimate that inflation will stabilize until the second half of 2023, so this year the price increases will still be hit. For this reason, they consider that the Virtual Mobile Operators (MVNO) can take advantage of the interest of consumers to lower their spending.

During the third quarter of 2021, 2.1 million new mobile lines were contracted and, of them, 38% (that is, 801,000) were concentrated by operators such as Izzi Móvil, Bait or YoTelco+, according to data from The Ciu consultancy.

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