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Factors that Could Challenge AT&T in Mexico

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America Movil permitted to collect interconnection fees

US-based (SPY) AT&T (T) appears to be headed for a more challenging competitive environment in Mexico in 2018. AT&T operates a wireless network in Mexico.

AT&T’s wireless network business generated $736.0 million in revenues in 3Q17. This segment helped lift AT&T’s international revenues by ~11.7% YoY (year-over-year) to $2.1 billion in the quarter, as the chart below shows.

In November 2017, Mexico’s telecom regulator, the Federal Institute of Telecommunications (or IFT), published revised mobile interconnection rates. For the first time in three years, these rates would allow America Movil (AMX) to charge rivals for connecting to its network.

According to a Reuters report, “America Movil will be permitted to charge 0.028562 peso per minute for mobile calls to its network as of Jan. 1. Competitors will be able to charge 0.112799 peso per minute for calls to their networks.”

According to IFT data, America Movil controls about two-thirds of Mexico’s wireless market, leaving AT&T and a host of other minority providers to share the rest.

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AT&T asserts new rates would cause $20 million annual loss

AT&T protested IFT’s new rates. According to AT&T’s calculations, America Movil’s rivals in Mexico would collectively lose $20.0 million per year for every peso cent that the dominant player charges in interconnection fees.

Expansion into Mexico was a part of AT&T’s efforts to diversify its revenue streams and expand its markets. Sprint (S) and T-Mobile (TMUS) have tried extensively to attract customers from major US wireless service providers AT&T and Verizon (VZ).

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