EconomyFinancialTelcel sells fewer cell phones but makes up for...

Telcel sells fewer cell phones but makes up for it with more expensive 5G plans

Buying a new cell phone at a Telcel Service Center is no longer so exciting for Mexicans. Or at least it did not in the second quarter of this year, when the subsidiary company of América Móvil lost 1,619 million pesos due to lower sales of smartphones.

But, although Carlos Slim’s company sold fewer mobile devices in the period, it entered 39,990 million pesos from the sale of services during the second quarter, 3,230 million more from the 36,760 million that this item generated in 2021. This thanks to the fact that 5G plans have allowed it to raise the average revenue per user (ARPU), that is, what a user spends on average on the telephone and internet services that they consume from their mobile device.

“The deployment of 5G networks allows us to expand capacity more efficiently and improves the customer experience with greater speed and quality,” says the company in its latest financial report. Until June 2022, América Móvil had deployed its 5G network in 40 cities, which together have a population of 50 million people.

The income generated by the company between April and June from the sale of services was 8.8% higher, compared to the same period in 2021.

Coppel, Elektra and Palacio remain with the sale of equipment

Jesús Romo, director of the Telconomía consultancy, explains that the sale of equipment is now more complex for telecommunications operators such as Telcel, due to the fact that the pandemic caused users to lengthen the time to replace their telephone equipment and redirect that expense to other items of the family economy.

“When Covid-19 started, equipment sales fell drastically and, although sanitary measures have already begun to relax, sales have not recovered to the same levels that we saw before the pandemic,” says Romo.

América Móvil’s financial statements reflect this negative trend. Between April and June of this year, the company that owns Telcel entered 16,845 million pesos from the sale of equipment in its service centers, 8.8% less than the 18,464 million it obtained for the same item in the second quarter of 2021.

The experts consulted agree that, in addition to the environment of economic uncertainty that has been developing since the pandemic, and which has been exacerbated by inflation, new consumption habits favor other sales channels. Retailers have become the new competitor for telecommunications operators in terms of smartphone sales.

Walmart , Palacio de Hierro , Coppel and Elektra have become the preferred channel for users to renew their phone, especially due to the numerous financing alternatives, discounts and promotions that they can find. Amazon has also become a helpful alternative.

“Consumption habits are being reconfigured. Users are now looking for companies that can offer them financing,” says Rolando Alamilla, market research manager for The Ciu consulting firm.

Telecommunications operators account for 50% of mobile device sales and the other half corresponds to retailers. Before the pandemic, companies like Telcel held 65% of telephone transactions, according to The Ciu.

“This obviously affects the preponderant (Telcel) more because it was the one that captured the most device sales in the country,” adds Alamilla.

In the accumulated of the first semester of the year, the losses for the sales of cellular equipment amount to 3,826 million pesos. The company entered 30,740 million from this business, 11% less compared to the 34,566 million obtained in the first half of 2021.

In general, says Romo, the last quarters of the year are “the strong ones” for cell phone sales, but the prospects for the second half of the year “are reserved.” “And smartphones are a category that is impacted in times of crisis,” says Romo.

5G, the new big business for América Móvil?

This technology is one of the great bets of the Slim family company, as it has allowed it to improve its Average Income per User (ARPU), which in the second quarter of the year was 166 pesos, nine pesos more than in the same quarter of 2021, when it was 157 pesos.

Telcel is already the operator with the best ARPU in the sector, followed by AT&T, with 141 pesos. In the case of Virtual Mobile Operators, it is 72 pesos and that of Telefónica, 63 pesos.

In addition, the company, which according to data from the Federal Institute of Telecommunications (IFT) concentrates 63.3% of the mobile market in the country, registered 81.3 million subscribers as of June this year.

América Móvil’s total revenues totaled 217,392 million pesos in the period, 3.32% more than those reported between April and June 2021. However, its profits decreased by 68% year-on-year in the second quarter of the year, to 13,683 million (679 million dollars) due to a higher comprehensive cost of financing, half of which was for the payment of net interest.

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