Despite overall slow growth in the Mexican cellular market due to the economic crisis in 1995, Telcel posted a 30.6 percent increase in subscribers for the year.
As the largest cellular carrier in Mexico with about 57 percent of the market, Telcel said its subscriber base grew from 306,000 at year-end 1994 to 399,500 at the end of 1995. Cellular subscribers overall numbered 700,000 at year-end 1995. The growth occurred in a year when business was bad in Mexico.
Grupo Iusacell S.A. de C.V.-the second largest carrier with A-band operations in four regions, including Mexico City, and 30 percent of Mexico’s subscribers-saw little growth in 1995. Its subscriber count grew just 6.2 percent from year-end 1994 through the third quarter of 1995, when Iusacell reported 207,087 subscribers.
A spokesperson from Ericsson Radio Systems, Telcel’s primary infrastructure supplier, reported a 20 percent overall subscriber growth rate in the Mexican market and a troubled equipment market. The vendor received just 20 percent of its original equipment orders from Telcel, which operates as the B-band carrier in all nine regions of Mexico.
Charles Hoffman, director general for Telcel, attributes the carrier’s success in 1995 to its business focus. “Our competitors aren’t doing as well, and also we’ve really focused on keeping our customers,” he said. “We’re really bending over backwards to take care of them.”
Another reason for Telcel’s subscriber growth is that it was well positioned in terms of network capacity before the peso crisis. In 1993, Telcel doubled its network capacity to 400,000 nationwide, according to Linda Barrabee, senior associate for Cambridge, Mass.-based Pyramid Research Inc. “Iusacell was capable of supporting growth [in 1995], but not as great as Telcel.”
Before the crisis, Iusacell was catching up to Telcel in terms of subscribers, said Barrabee. From 1993 to 1994, Telcel saw 57 percent subscriber growth, while Iusacell saw 53.5 percent growth, she cited. “Something happened [to Iusacell] post peso devaluation,” said Barrabee. “Whether you want to attribute it to [lack of] capacity, maybe. But more likely it’s a combination of issues. Iusacell had counted on Sprint [Corp.] as a partner, then the peso crisis happened. So it was battling a lot of issues. It may not have been financially prepared to grow its network.”
Iusacell filed a lawsuit in late 1995 against Telcel and its parent company, Telefonos de Mexico (Telmex), charging they engage in cross-subsidization and discrimination with the objective of reducing competition. Iusacell said it hopes to achieve structural separation of the two entities through the lawsuit.
“There’s absolutely no merit to [the lawsuit],” responded Telcel’s Hoffman in January. “We’re a separate subsidiary. We stand on our own.”
Elsewhere in the Mexican cellular market, the next largest player is Motorola Inc., which has stakes in the four regions bordering the United States. Those four operators claimed 7 percent of subscribers in 1995.
The Motorola companies are experiencing “stagnant” growth, a situation that will continue well into 1997, according to a recent report by New York-based Northern Business Information. “The companies have yet to recover their investment, which has been sizable, and have been running at a loss since the beginning.”
In region 8, which includes the Yucatan Peninsula, independent Portatel competes against Telcel. Controlled by the Warholtz family, it has been the target of numerous offers, but has declined to sell.
