EconomyFinancialTelcel, AT&T or Bait de Mama Lucha? The question...

Telcel, AT&T or Bait de Mama Lucha? The question that Mexicans ask themselves in the face of inflation

New competitors are gradually taking away market share from the traditional operators of mobile phone and internet services. Since the Covid-19 pandemic began, Virtual Mobile Operators (MVNO) have gained momentum. Between 2020 and 2021 dozens of new players emerged. Walmart, for example, launched Bait in mid-2020, just a few days after Izzi introduced his own, izzi Mobile. Now, inflation is giving a new boost to the MVNOs, which unlike traditional players, such as Telcel, do not have any frequency spectrum concession, therefore, they rent it to others.

“The small operators that come with Walmart or Coppel, or even Telefónica itself, can lower that (Telcel’s) market share a bit,” said Luis Fernando Borjón, former commissioner of the Federal Institute of Telecommunications (IFT).

According to The Ciu data, from 2020 to the end of 2021, MVNOs have gone from having a market share of 1.9% to 5.1%. Although it is still a moderate percentage, compared to Telcel’s 60.8% stake, it was a higher growth than expected by the IFT, which was 2.04% by the end of 2021.

Brian Rodríguez, an analyst at Grupo Financiero Monex, considers that the trend of increasing market share of MVNOs such as Walmart’s Bait, Megacable’s Megamovil, Televisa’s Izzi Móvil, or Telgen is due to the fact that users consider that their rates are more affordable compared to those of traditional operators, which is more attractive in a context of economic uncertainty.

“High inflation impacts the economy and the wallet of consumers who tend to look for other more affordable options. In the case of internet and mobile telephony services, MVNOs are attractive to a large part of the population”, says Rodríguez.

The Selectra comparator ensures that MVNO connectivity services are up to 30% cheaper than those offered by traditional operators. In addition, MVNOs offer additional benefits that consumers are starting to appreciate. Bait, Walmart’s mobile service, allows users to access free megabytes for making purchases at its branches.

With the arrival of virtual mobile operators, the market went from having three to more than 100 options to contract telephony services. Nelson, a driver for Didi, is one of the thousands of consumers who have decided to try the OMV services. “I no longer had enough to pay for a Telcel plan, it’s very expensive. That’s why I changed to Bait, the one from Walmart,” he says while driving his Nissan V-Drive.

In the first quarter of this year, América Móvil reported a drop of 39,000 postpaid lines (rental plans) to close with 14,519 million users during the first quarter of this year, which represented a drop of 0.3% from 14,558 million. lines registered in the same period last year. This decrease in postpaid lines is attributed to the inflationary pressure that affects users’ pockets.

Rodríguez believes that inflation causes the large telephone operators such as Telcel, AT&T and Telefónica to have the challenge of maintaining subscribers. In their favor, say the specialists consulted, traditional players have a stable network to make calls.

Jesús Romo, director of Telconomia, considers that the MVNOs still have the challenge of consolidating their business model, since they currently still have poor coverage. That does not take away from their main attraction: a low price. Pillofón, the OMV of youtuber ‘Luisito Comunica’, offers phone plans from 134 pesos, which includes 5 GB, unlimited calls and messages. Telcel’s cheapest plan costs 229 pesos and offers 1.5 GB, unlimited calls and messages.

Despite the challenges, the consulting firm The Ciu estimates that MVNOs could reach up to 20% within five years, surpassing companies such as AT&T and Telefónica, which at the end of 2021 hold 15.4% and 18.7%, respectively.

Inflation and a lower exchange of telephones affect telephone revenues

Equipment revenues totaled 73,836 million pesos in the first quarter of this year, 10.2% less than in the same period of 2021; Telcel and Telefónica were the most affected firms.

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