2015 03 Kc Telecommunication Sector in Mexico (1)

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    Selected informationabout theTelecommunicationSector in Mexico

    February 2015

    Overview of theTelecommunicationSector in Mexico:Fixed and Mobile Lines

  • Knowledge CenterPwC Mexico Page 2 of 17

    Table of Contents

    Executive Summary 3

    Global Telecommunication 4

    Telecommunication in Latin America 6

    Telecommunication in Mexico 8

    Megatrends 11

    Demographic Shifts 12

    Accelerating Urbanization 13

    Technology Breakthroughs 14

    Economic Power Shift 15

    Knowledge Center Mexico 16

  • Knowledge CenterPwC Mexico Page 3 of 17

    Executive Summary

    In 2014, global fixed telephone line subscription declined to 1,146.7 million while global fixed wired broadbandincreased to over 711 million subscriptions. In the mobile market, both global mobile subscription and globalactive mobile broadband subscription increased to more than 6,915 million and 806.9 million, respectively, inthe same year. Regionally, Asia-Pacific leads the total global market as it has the largest share in both fixed linesand mobile subscription. Differences between the wireless and fixed lines across regions are constant except forSub-Saharan Africa, where the number of mobile subscription greatly surpasses the number of telephone linesinstalled, which is the effect of easier access to wireless technology compared to other basic telecommunicationservices. Overall, there is a global migration from telephone lines to mobile phones, mainly due to the marketpreference over wireless communication.

    Fixed telephone line subscriptions in Latin America have been gradually decreasing and reached 108 millionwhile fixed wired broadband subscribers increased to 54.26 million. Globally, Brazil ranks fifth in terms ofsubscribers and supplies more than a third of the regions unique subscribers, with 114 million in September2014. In 2013, the region accounted for around 10% of the global mobile market in terms of mobile operatingrevenues, with 108.7 billion USD. In the same year, the region had more than 200 mobile broadbandsubscribers. Since the early 2011, mobile services have been increasing as the regions main method of accessinginternet as it surpassed the number of fixed broadband services. With the growth in the last 3 years, there arenow more mobile broadband connections than fixed broadband in all of the leading markets in Latin America,with Brazil leading the migration.

    One of the first milestones in the telecom industry in Mexico was in 1996 when an independent regulator wasestablished, followed by the opening of competition of long-distance market in 1997 and local services in 1998.One mobile operator continues to dominate over 75% of Mexicos mobile market, even with the presence ofother operators. Like most industrializing countries, telecom infrastructure is developing first in major businesscenters, particularly in Mexico City, Guadalajara and Monterrey. The number of installed telephone lines inthe country in 2013 did not change significantly from the previous year. Though there was a slight increase in2012, improvements are predicted to be dormant as migration to wireless technology is expected. Being one ofthe top users of smartphones around the world, Mexicos mobile market is expected to expand in the next yearsto come. In 2013, mobile subscriptions in the country reached over 105 million. Currently, telecommunicationsin Mexico is not just about voice transmission but also includes data transmissions such as electronic mail andsocial media. With a fast growing population and technology advances, Mexicos telecommunication sector willremain significant and is expected to grow over the next five to ten years.

    This publication provides information about the fixed line and mobile market of the telecommunicationindustry in the world, Latin America and Mexico. Additionally, it tackles specific trends that are currentlysignificant in the Mexican economy and society.

  • Knowledge CenterPwC Mexico Page 4 of 17

    Global TelecommunicationGlobal fixed telephone line subscription in 2014 reached 1,146.7 million, which was mostly from the Asia-Pacificregion (44.7%). This is followed by the Americas (22.2%) and Europe (21.1%). The African region had the leastsubscription, with just 1% of the world total. All of the regions have shown small increases of fixed telephonepenetration since 2007, except the Asia- Pacific region, which is switching to other alternatives.1

    On the other hand, global fixed wired broadband subscriptions have been increasing since 2007 and reachedover 711 million subscriptions in 2014. The Asia-Pacific region also leads the global fixed wired broadbandsubscription in 2014, with over 312 million (44%). This is followed by Europe with 24.4% and the Americaswith 22.9%. Notably, the CIS region massively increased its subscription from 6.28 million in 2007 to 40.31million in 2014.1

    46.1% 44.7%

    22.2% 22.4%

    21.1%21.4%

    1,253.7 1,249.4 1,253.5 1,229.0 1,201.0 1,178.4 1,157.8 1,146.7

    2007 2008 2009 2010 2011 2012 2013 2014*

    Global Fixed Telephone Line Subscription, 2007-2014 (in millions)

    Asia-Pacific The Americas Europe CIS Arab States Africa Unclassified

    35.1%44%32.2%

    24.4%

    28.4%

    22.9%

    346.1411.0

    468.1526.3

    588.0635.3 673.3

    711.1

    2007 2008 2009 2010 2011 2012 2013 2014*

    Global Fixed Wired Broadband Subscription, 2007-2014 (in millions)

    Asia-Pacific Europe The Americas CIS Arab States Africa Unclassified

    CIS Commonwealth of Independent States*estimatedSource: ITU

    CIS Commonwealth of Independent States*estimatedSource: ITU

    1 United Nations International Telecommunication Union (ITU)

  • Knowledge CenterPwC Mexico Page 5 of 17

    It was also reported that global mobile subscription increased from 3,367.8 million in 2007 to more than 6,915million in 2014. It is led by the Asia-Pacific region, with 3,604 million (52.1% of the total world subscriptions).In the same year, the Americas, with 15.3% share, surpassed Europe that was 2nd in 2007. Additionally, it wasrevealed in 2013 that Sub-Saharan Africa is known as the fastest growing region in this market as its uniquemobile subscribers growing by 18% annually over the last five years. It also reported that the mobile marketmakes up the 6% of the regions GDP, higher than any other region, and is expected to increase to 8% by 2020.This is mainly due to easier access to mobile than other telecommunication services.2

    Global active mobile broadband subscription alsoincreased from 806.9 million in 2o1o t0 2,315.3million in 2014. Asia-Pacific had the largestnumber, with 39.7% of the world total. Though itdecreased its share from 28.5% in 2010 to 24.9%in 2014, the Americas still ranks 2nd.

    The global split of mobile connections in the first quarter of 2013 was 77% prepaid and 23% contract and it wasexpected to remain unchanged in the next few years. Post-paid mobile subscriptions are more popular indeveloped areas such as North America, where in 2012, 75% of the total mobile connections were post-paid.2Other regions have mostly prepaid users, especially Africa, where 96% of the total mobile subscribers useprepaid services. This may be due to the different level of accessibility in the different markets as somecountries require contracts while in others, prepaid subscriptions are easier to get.

    41.5%52.1%20.1%

    11.3%

    19.3%

    15.3%3,367.8

    4,029.94,639.9

    5,290.15,863.1 6,232.0

    6,662.0 6,915.2

    2007 2008 2009 2010 2011 2012 2013 2014*

    Global Mobile Cellular Subscription, 2007-2014 (in millions)

    Asia-Pacific Europe The Americas CIS Africa Arab States Unclassified

    Source: GSMA Intelligence

    35.5%

    39.7%28.5%

    24.9%

    23.3%

    17.2%

    2010 2011 2012 2013 2014*

    Global Active Mobile BroadbandSubscription, 2007-2014(in millions)

    Asia-Pacific The Americas Europe CISArab States Africa Unclassified

    *estimatedSource: ITU

    96% 85% 84% 82% 80%49%

    29%

    4% 15% 16% 18% 20%51%

    71%

    SSA CIS MENA APAC LATAM EU NA

    Contract/Prepaid Connections Split,by region, 2013 (%)

    Prepaid Contract

    Source: GSMA Mobile Economy 2013

    CIS Commonwealth of Independent States*estimatedSource: ITU

    2 GSMA Intelligence

  • Knowledge CenterPwC Mexico Page 6 of 17

    Telecommunication in Latin America

    Total Fixed telephone line subscriptions in LatinAmerica have been gradually decreasing andreached 108 million while fixed wiredbroadband subscribers increased to 54.26million. 3

    In 2013, the number of unique subscribers in Latin America was 320 million, with a penetration of 51.6%. It isexpected to grow at a steady rate until 2020. Though penetration rate is expected to reach almost 60%, it is stillbelow the average of mature markets (70-80%).

    The mobile market of Latin America is dominatedby Brazil, supplying more than a third of theregions unique subscribers (114 million) bySeptember 2014. Globally, Brazil ranks fifth interms of subscribers and is expected to takeJapans place as fourth-largest by the end of 2015.In the same time period, the five largest countriesin the region - Brazil, Mexico, Argentina,Colombia and Venezuela - have a total of 230million unique subscribers, which is more than70% of the Latin American total.

    320 328 341 353 363 373 382 390

    51.6% 52.4%53.9% 55.2%

    56.2%57.2% 57.9%

    58.6%

    48%50%52%54%56%58%60%

    050

    100150200250300350400450

    2013 2014* 2015* 2016* 2017* 2018* 2019* 2020*

    Mil

    lion

    Latin American Unique Mobile Subscribers, 2013-2020 (million people and %)

    Mobile Penetration

    114; 35%

    46; 14%

    28; 9%25; 8%

    17; 5%96; 29%

    Latin American Mobile Markets by UniqueSubscribers, September 2014 (millionpeople and % of total)

    BrazilMexicoArgentinaColombiaVenezuelaOthers

    101.

    10

    105.

    52

    105.

    39

    105.

    63

    106.

    66

    107.

    66

    108.

    68

    18.8

    7

    26.9

    0

    32.1

    1

    37.7

    0

    44.6

    9

    49.5

    1

    54.2

    6

    2007 2008 2009 2010 2011 2012 2013

    Latin American Fixed LineSubscriptions, 2007-2013 (in millions)

    Fixed Telephone Line Fixed Wired Broadband

    Source: ITU

    Source: GSMA Intelligence

    *forecastSource: GSMA Intelligence

    3 United Nations International Telecommunication Union (ITU)

  • Knowledge CenterPwC Mexico Page 7 of 17

    Since the early 2011, mobile services have been increasing as the regions main method of accessing internet,surpassing the number of fixed broadband services. With the growth in the last 3 years, there are now moremobile broadband connections than fixed broadband in all of the leading markets in Latin America. One reasonthat contributes to this shift is the lack of bases for fixed connections, especially in rural areas. Brazil leads themigration as 111.3 million people were already connected through their mobiles in 2013. By 2017, 3G isforecasted to account for around half of Latin Americas connections as network coverage is increasingthroughout the region.

    The rate of migration from fixed broadband internet to 3G in the region has recently been accelerating, fuelledby the fast technological shift to faster connections that is underway. 2G services accounted for 78% of allconnections in Latin America, but fell to 60% by September 2014. At the same time, 3G connections grew to39%, which is higher than the global average of 32% and the developing market 27%. The 4G market is stillyoung but adoption is expected after the operators deploy their networks.4 As of September 2014, 4Gconnections cover 1% of the entire region, which is in line with the developing markets average but very littlecompared to 35% in North America, the leading market for Long-Term Evolution (LTE). However, the marketis expected to grow averagely at the rate of 85% annually in the next seven years to 2020. In the recent years,3G connections have surged in Brazil, with half of the 3G users found in the country alone. Additionally, Brazilalso had the biggest number of 4G connections in the region, with 4.6 million as of September 2014. Colombialed the region in terms of 4G mobile operators as around 95% of them are licensed to provide 4G mobileinternet. As of October 2014, 44 operating networks in 18 countries in the region have launched 4G networks.On the other hand, Costa Rica, Guatemala and El Salvador are still waiting for faster internet services to beavailable in their countries; Venezuela was expected to have 160 MHz operating license by the end of 2014.

    454 250 170 240 202 235 238 220 170 250 170 215 150 210 204

    180

    200 393180

    634

    450 415350

    300 282 275 262 260 254 250 250 215 210 210 204

    Latin American Mobile Internet Operators, 2013

    2G/3G 4G

    111.3

    35.719.5

    11.7 11.7 7.5 7.320.2 13.6

    5.7 2.2 2.2 1.6 4.5

    Brazil Mexico Argentina Chile Venezuela Peru Colombia

    Mobile vs. Fixed Broadband Connections, 2013 (in millions)

    Mobile FixedSource: GSMA Intelligence; ITU

    Source: GSMA Latin America

    4 GSMA Intelligence

  • www.pwc.com/mx

    Knowledge CenterPwC Mexico Page 8 of 17

    Telecommunication in Mexico

    The Telecommunication industry production hada generally significant increase in 2012, reaching18.3% compared to 4.3% from the previous year.The latest recorded data stated that this industryhad a 3.16 % participation in the total GDP in thethird quarter of 2013.

    The telecommunication sector employed over 132,567 people in 2012, a 0.27% increase from 2011 and 31%increase from 2005.

    Investment in the telecommunication industry has also been rising, and in 2012, it reached 6,799 millionUSD, which is the highest figure seen since 2000. Foreign Direct Investment for the sector from 1999 to2014 accumulated to 131.8 million USD.

    100,

    892

    101,

    501

    109,

    691

    117,

    178

    120,

    403

    123,

    534

    128,

    934

    132,

    567

    0.23% 0.23%0.24%

    0.26% 0.26%0.27% 0.26% 0.27%

    0.20%0.21%0.22%0.23%0.24%0.25%0.26%0.27%0.28%

    020,00040,00060,00080,000

    100,000120,000140,000

    2005 2006 2007 2008 2009 2010 2011 2012

    Pers

    ons

    Telecommunication Employment in Mexico, 2005-2012

    Growth Rate

    5,22

    8.6

    5,74

    9.3

    3,12

    8.2

    2,58

    4.5

    3,61

    6.2

    3,54

    5.5

    3,69

    9.2

    3,27

    3.0

    3,64

    8.2

    2,89

    0.7

    5,93

    9.9

    5,10

    7.9

    6,79

    9.3

    4,93

    3.8

    2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013*

    Telecommunication Services Investment, 2000-2013 (million USD)

    Source SIEMT

    1.66 1.89 2.25 2.36 2.73

    2.61

    2.62 2.98 3.16

    2005 2006 2007 2008 2009 2010 2011 2012 2013*

    Participation of Telecommunicationin the Total Mexican GDP, 2000-2013 (%)

    *until September 2013Source: SIEMT

    *until September 2013Source: SIEMT

  • Knowledge CenterPwC Mexico Page 9 of 17

    The Mexican fixed line telecoms market has declined in the past few years. The number of installed telephonelines in 2013 only changed 0.01% from the previous year. Though there are slight increases, improvements arepredicted to be dormant as technological developments slow down. The voice only segment was the marketsmost productive feature in 2012, with over 5.8 billion USD of revenues or 62.7% of the markets overall value.Overall market performance of the industry is expected to remain stagnant until 2017.5

    Over the years, the dominating telephone operator has been holding 86.5% of the total subscribers. Reasons forthe low amount of companies in this market included the difficulty of supplying a complex, reliable andgeographically extensive network. Switching costs with this market are often high, as exiting long-term supplycontracts can be difficult.

    Before 1997, the telecommunication industry was not liberalized and services had expensive prices and poorquality, mainly because of the commercial difficulties faced by the Internet Service Providers (ISPs). Internetproviders before were forcing ISPs to wait for months to install new lines and to increase routing capacity. Mostrecently, the internet market has become one of the fastest growing segments in the countrys telecom sector. Interms of broadband penetration, Mexico has the lowest penetration rates among OECD countries. Little morethan 30% of the population regularly uses the internet while broadband penetration by mid-2012 was about17%, well below the OECD average of 30%. Poverty is one factor that correlates to low internet penetrationalong with a low number of ISPs, operating in the country. Broadband, especially DSL, is one of the fastestgrowing telecom sectors in Mexico, with the subscriber growth averaging 25% per annum over the ten years2002-2011. Aside from DSL, broadband access is can also be accessed via cable, satellite and radio.

    Total fixed wired broadband subscription in 2013 increased by 7.15% to more than 13 million. Though growthhas slowed down a bit by 2011, compared to the percentage growths in 2004-2010, it is still increasing.6

    19.5

    12

    19.8

    61

    19.9

    98

    20.4

    91

    19.5

    06

    19.9

    19

    19.9

    97

    20.5

    88

    20.5

    90

    7.96%

    1.79%

    0.69%2.47%

    -4.81%

    2.12%0.39%

    2.96%

    0.01%

    -10%

    -5%

    0%

    5%

    10%

    0

    5

    10

    15

    20

    25

    2005 2006 2007 2008 2009 2010 2011 2012 2013

    Mill

    ions

    Mexican Fixed Telephone Line Subscription, 2005-2013(in millions and % growth)

    % GrowthSource: ITU

    1.9223.020

    4.468 7.427

    9.28411.101 11.868

    12.71713.62781.82%

    57.10%

    47.96%

    66.20%

    25.00% 19.58%

    6.91% 7.15% 7.15%

    0%

    20%

    40%

    60%

    80%

    100%

    0

    5

    10

    15

    2005 2006 2007 2008 2009 2010 2011 2012 2013

    Mill

    ion

    Mexican Fixed Wired Broadband Subscription, 2005-2013 (in millions)

    % Growth

    Source: ITU

    5 United Nations International Telecommunication Union (ITU)6 Marketline

  • Knowledge CenterPwC Mexico Page 10 of 17

    The mobile phone market consists of all analogs and digital handsets (mobile phone devices itself) used formobile telephony. Despite the decline in 2009, the Mexican mobile phone market has been very active in theeconomy. In 2013, mobile subscriptions in the country reached over 105 million.

    Mexico has one of the largest prepaid bases in Latin America. Prepaid cards have made mobile phone servicesaccessible to certain parts of the population that are not considered credit-worthy for a mobile contract or havelimited budgets or just to make few outgoing texts and calls. Some advantages prepaid has for operators arelower acquisition costs, the elimination of bad debt problems and wider distribution as operators can sell theirprepaid packages at retails stores. In 2012, Mobile Network Operators (MNO) continued to focus on increasingtheir contract subscriber base. In 2013, the number of mobile contracts increased slightly from the previousyear but prepaid services still dominate the Mexican mobile market.

    47.129 55.395 66.559 75.303 83.194 91.383 94.583 100.727 105.006

    22.57%

    17.54%

    20.15%

    13.14%

    10.48% 9.84%3.50% 6.50%

    4.25%

    0%

    5%

    10%

    15%

    20%

    25%

    0

    20

    40

    60

    80

    100

    120

    2005 2006 2007 2008 2009 2010 2011 2012 2013

    Mill

    ion

    Mexican Mobile Cellular Subscription, 2008-2013 (in millions)

    % Growth

    Source: ITU

    Source: GSMA

    92% 87% 86% 85% 85% 83%

    8% 13% 14% 15% 15% 17%

    2008 2009 2010 2011 2012 2013

    Mexico Proportion of Prepaid/Postpaid Subscribers,2008-2013

    Prepaid Postpaid

  • Knowledge CenterPwC Mexico Page 11 of 17

    MegatrendsPwC has identified 5 megatrends (demographic shifts, shifts in global economic power acceleratingurbanization, climate change and resource scarcity, and technological breakthroughs) that will influenceindustries over the next few years.

    Many countries, including Mexico, are experiencing a massive demographic shift which will have its implicationfor labor market. Searching for better jobs and living conditions, people would move from the countryside tocities, which, as a result, will put natural resources under pressure of meeting the needs of these people. Muchof the expected growth will take place in the developing countries Mexico is expected to be among the worldstop 10 economies ranked by Purchasing Power Parity (PPP) in 2030.

    Though the telecom industry is facing a number of challenges caused by those megatrends, we mainly focus onthree megatrends and correlating underlying trends.

    Trend Underlying Trends Implication

    Aging Population Change in Consumer Behavior

    Demographic Shifts

    Urban Migration Smart Cities

    Accelerating Urbanization

    Network Development M2M

    Technology Breakthroughs

    Economic Power Shift

    Digital Economy Telecoms Reform

  • Knowledge CenterPwC Mexico Page 12 of 17

    Demographic ShiftsUnderlying Trend:

    Mexico is moving towards an aging country thoughthe aging problem is not as severe as it is in the othercountries. In 2010, the number of Mexicans aged 65or older was 7,053 thousand (6% of total population)and it is expected that it will grow to 13,227thousand (10% of total population) in 2025 and31,542 thousands (20% of total population in 2050).

    There are two factors that contribute towards anageing population in a country, which are fertilityrate and life expectancy. Mexico has been showing adecreasing trend in the number of children perwoman (2.28 children per woman in 2014) and anincrease in life expectancy. Life expectancy forMexicans is 74.5 years and in 2050, it will increaseto 79.42 years. This phenomenon causes anaccelerated population aging process.7

    Implication:

    The aging population has considerable consequences for many industries such as healthcare, public services andso on. Some existing surveys show that new communication technologies such as internet, mobile phones andsmartphones are underutilized by older people. Smartphones in Mexico are mostly used by people aged 18-24,followed by the 25-34-year-old age group. On the other hand, people aged 25-34 preferably use tablets, followedby the 18-24-year-old age group. The 35-44-year-old age group was the third biggest users for both tablets andsmartphones.8 Additionally, people in the age group of 12-17 are the biggest users of computer and internet,with 24.3% and 24%, respectively. This is followed by the 18-28-year-old age group and 25-34-year-old agegroup.9

    However, the above mentioned studies are mostly focused on individuals who have been introduced to mobilecommunication later in their lives, not those that became mobile users during their youth. Therefore, eventhough the current studies demonstrate that young adults are avid users of technology, but more studies onusage of technology by age group is required.

    19%

    12%

    8%

    5%

    18.4%

    12.2%

    7.4%4.6%

    0% 10% 20% 30%

    6-11

    12-17

    18-28

    25-34

    35-44

    45-54

    55+

    Internet and computer usageby age group in Mexico, 2012

    Computer usage Internet uage

    22%

    10%

    0%

    27%

    13%

    1%

    0% 10% 20% 30% 40%

    18-24

    25-34

    35-44

    45-54

    55+

    Smartdevice sales by agegroup in Mexico

    Tablet users Smartphones users

    Source: INEGI Source: AMIPCI

    7374757677787980

    1.952.002.052.102.152.202.252.30

    2010

    E20

    13E

    2016

    F20

    19F

    2022

    F20

    25F

    2028

    F20

    31F

    2034

    F20

    37F

    2040

    F20

    43F

    2046

    F20

    49F

    Years

    Num

    bero

    fChi

    ldre

    n

    Fertility rate (number of children) and lifeexpectancy (years) in Mexico, 2010 andforecast

    Fertility rate Life expectancyE-estimation; F-forecastSource: CONAPO

    7 CONAPO8 INEGI9 AMIPCI

  • Knowledge CenterPwC Mexico Page 13 of 17

    Accelerating UrbanizationUnderlying Trend:

    The process of urbanization in Mexico began in the sametime that the industrialization process in the country, around1940. Since 1960, Mexican urban population has been higherthan rural population. The proportion of urban population inMexico increased from 52% in 1962 to 78% in 2012, andkeeps on growing. It is expected that in 2050, the number ofpeople living in the Mexican urban area will be 123.95million, a 40% growth compared with 88.27 million in2010.10

    Implication:

    The constant growth of population living in large urban agglomerations makes important the delimitation ofmetropolitan areas, municipalities and states, for a better promotion of the urban development, allowing theconjunction between distribution and growth of territorial population towards sustainable development. Smartcities work in bringing together technology, government and society to create smarter economies, mobility,environment, governance and overall quality of life.

    In March 2014, Guadalajara, Mexicos 2nd largest city started collaborating with smart city builders and expertsto assist them in executing the IEEE (Institute of Electrical and Electronics Engineers) Smart Cities Initiative.The initiative aims to select and transform a total of nine cities, including Guadalajara through the usage ofinformation and communication technologies (ICT) to be more intelligent and efficient in the use of resources.

    Metropolitan Area (ZM) 2010Population

    ZM de Valle de Mxico 20,137,152

    ZM de Guadalajara 4,434,252

    ZM de Monterrey 4,080,329

    ZM de Puebla 2,336,694

    ZM de Toluca 1,846,602

    Source: CONAPO

    10 United Nation

  • Knowledge CenterPwC Mexico Page 14 of 17

    Technology BreakthroughsUnderlying Trend:

    With the falling prices of smartphones, 4G technology penetration isexpected to increase, as smartphones are the main devices formobile internet services. Smartphone penetration is expected toreach 61.9% of the total Mexican population at the end of 2020, a bigincrease from 17.9% in the 3rd quarter of 2014.

    Mobile operators have been investing in 4G LTE infrastructure notonly in Mexico, but also in the whole Latin America. Theimprovement of incomes and the decrease of the cost of technologywill increase the 4G subscriptions. It was reported that in 2013, totalmobile internet operators totalled to 210, wherein 60 of them alreadyprovided 4G mobile internet.

    Implication:

    Though still at its early stages of development, Machine to Machine (M2M) technology is beginning to generateinterest from mobile operators, governments and M2M hardware and solutions companies. This growth will bemainly in the areas of Mexicos smart meters, digital signage, telecare, remote monitoring, mobile payments andconnected cars, M2M depends heavily on a highly developed mobile network infrastructure, preferably 4G LTE(4G wireless communications standard), to send large quantities of data at high speeds. The consistent powersupply, as well as the presence of data centres and highly developed cloud computing systems will also have animpact on the M2M technology.

    In 2014, mobile network companies already announced M2M projects, which aims to provide clients in not onlyMexico, but as well as other Latin American countries , the power to connect, manage and control M2Mcommunications with local SIM cards. One of these projects expects to increase the number of connecteddevices from 1.3 billion today to 20 billion in 2020. Additionally, this will also improve the societys resourcesand time efficiency by connecting machines such as energy meters, vehicles and buildings.

    2G/3G

    71%

    4G29%

    Mexican Mobile InternetOperators, 2013

    Source: GSMA Intelligence

    Source: GSMA Intelligence

  • Knowledge CenterPwC Mexico Page 15 of 17

    Economic Power ShiftUnderlying Trend:

    Current economic conditions i.e. economic power shift to Asia are fostering investment in technology asdeveloping countries are trying to spark growth and developed countries seek new ways to cut costs and driveinnovation. 11

    Implication:

    On July 15th, 2013, Mexicos president, Enrique Pea Nieto, unveiled the Transport and CommunicationsInfrastructure Investment Program 2013-2018. The final investments into the nations infrastructure over thesix-year period are 4 trillion MXN (315 billion USD), out of which 700 million MXN will be invested into thecommunication sector. The Mexican government is committed to inject the above mentioned amount across fiveregions with (see Investments in the telecoms sector by region (million MXN). With the program, thegovernment is aimed to:

    (1) Expand the network coverage and capacity, to increase broadband services access at public and communitysites;

    (2) Encourage competition, reduce cost and improve access to telecommunications services;(3) Contribute to the Constitutional Reform of Telecommunications.

    Region 1142 million MXN

    Region 5142 million MXN

    Region 4130 million MXN

    Region 3141 million MXN

    Region 2145 million MXN

    Investments in the telecoms sector by region (million MXN)

    Source: SCT

    11 Oxford Economics

  • Knowledge CenterPwC Mexico Page 16 of 17

    Knowledge Center MexicoKnowledge Center Mexico acts as a knowledge, innovation and best practices provider to PwC practitioners.This enables the practitioners to successfully identify new service offerings, approach the market and completeprojects.

    The expert staff of Knowledge Center designs innovative solutions for PwC partners and managers. TheKnowledge Center delivers knowledge and experience through:

    Provide consulting and training in the use of variousknowledge management tools.

    Research and information searches, based on the informationneeds of PwC staff & partners.

    Participating in the strategy design, related to globalKnowledge Management & Innovation Management.

  • Knowledge CenterPwC Mexico Page 17 of 17

    Reach usJos Antonio QuesadaPartner Clients & [email protected]

    Manuel Flores De OrtaSr. Specialist Manager Knowledge Management and Knowledge Center Clients & [email protected]+52 (55) 5263-8543

    Alexandra [email protected]+52 55 5263 6000 ext. 7536

    Ekaterina [email protected]+52 55 5263 6000 ext. 7586

    Itzel [email protected]+52 55 5263 6000 ext. 5574

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