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New telecoms agency to announce next auction by January

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Source says operators could again forsake Mexican tender

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Mexico's Telcel dominates the local market

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US says high spectrum costs block competition

By Sarah Morland

MEXICO CITY, Sept 10 (Reuters) - The second-biggest

mobile telecommunications operator in Mexico, AT&T ( T ), will

likely not participate in the country's next auction of

frequencies used to provide network services, a source at the

company told Reuters, citing high costs.

The telecommunications market in Latin America's No. 2

economy is dominated by local operator Telcel, a unit of

regional giant America Movil, controlled by Mexican

billionaire Carlos Slim.

Mexico's spectrum costs significantly more than global

averages due to its structure of annual usage fees, which

disadvantages foreign players with fewer customers in the

country like Dallas-based AT&T ( T ) and Spain's Telefonica,

which operates Movistar.

Movistar in 2019 began returning its spectrum to the state

and now operates via AT&T's ( T ) network.

"With the current spectrum costs it is very probable that

this auction will again be left deserted, as happened in the

last auction," a source at AT&T ( T ) said, adding it was also very

unlikely AT&T ( T ) itself would be interested in taking part.

The source said AT&T ( T ) had taken its concerns to the Mexican

government, but these were not addressed. Mexico's economy and

finance ministries did not immediately respond to requests for

comment.

The fees have also caused friction with the U.S., whose

trade office said in a report on trade barriers earlier this

year it was pushing Mexico to lower costs and address the

dominance of Telcel.

Mexico considers the spectrum a national resource and usage

fees an important contributor to state coffers, but companies

say the high costs discourage smaller providers from buying

spectrum, resulting in less tax revenue overall.

A 2021 auction saw just three of 41 blocks of spectrum sold,

to AT&T ( T ) and Telcel. Now-dissolved sector watchdog IFT said the

fees stifled competition and blocks returned to the state

between 2020 and 2023 cost nearly $700 million in lost tax

income.

Mexico's government dismantled IFT last year, causing the

suspension of what would have been Mexico's first auction of 5G

frequency bands. A fledgling new state agency is legally

mandated to launch a plan for a new tender by January.

In the country's proposed budget for next year presented

this week, the government said it would maintain its existing

structure of spectrum costs in 2026, although it offered

discounts for operators investing in under-served parts of the

country.

($1 = 18.6154 Mexican pesos)