Will AT&T Use Mexico Wholesale Mobile Network?

Mexican regulators have approved AT&T’s Iusacell acquisition, which now sets up an interesting issue: how does AT&T expand geographic coverage nationwide, especially for the new Long Term Evolution network AT&T believes represents a major opportunity? 

To be sure, Iusacell now reaches about 70 percent of Mexico’s potential mobile consumers and has perhaps eight percent to nine percent market share. But those networks use CDMA or GSM 3G air interfaces. The LTE network remains to be built. Nor is the spectrum to support the new network readily available.

“Expanding and enhancing Iusacell’s mobile network to cover millions of additional consumers and businesses is our top priority,” according to Randall Stephenson, AT&T chairman and CEO.

Consistent with AT&T thinking about the market opportunity Long Term Evolution adoption represents. Smartphone penetration in Mexico is about half that of the United States.

“AT&T sees a significant opportunity to increase smartphone adoption and mobile Internet usage in Mexico,” AT&T said. How AT&T will do so, and when, is not yet clear.

In the immediate future, it is more likely AT&T will create new cross-border calling services, as that will leverage existing customers--fixed and mobile--on both sides of the border.

China Telecom, for example, is creating a consortium to win a contract to build a national wholesale mobile network in Mexico. Others bidders are expected to emerge as well.

Whether AT&T would use such a network is one question. Whether it would use a network built by China Telecom that also uses Huawei gear is another question.

But the new network, which must be built, according to the Mexican constitution, might be valuable for mobile virtual network operators as well as mobile operators with at least some owned facilities, as the network would create a seamless national infrastructure, presumably also offering Long Term Evolution services, as soon as 2018.

Presumably, the wholesale network would allow contestants to use spectrum without specifically acquiring spectrum of their own. But sourcing fron the wholesale network also means each contestant would have the same features, coverage and quality as all others on the wholesale network.

That might leave retail price as the key variable, within some clear limits, unless contestants were able to bundle with other products and services.

So a reasonable person might argue AT&T will not want to rely on the wholesale network, burt rather build its own facilities.