ORLANDO-Economic problems elsewhere in the world have hit home in Mexico’s new personal communications services market. Two of the PCS license winners there-Midicel and the SPC consortium-have announced they are worried about being able to make final payments for their licenses, due Sept. 30, according to Kipp Gearhart, an analyst with Americas Telecom Consultants in Washington, D.C.
Gearhart said economic troubles in Asia can be attributed to the companies’ concerns in Mexico. At the beginning of the summer Korea Telecom, with its own issues to deal with in the troubled South Korean economy, pulled out of its stake in Midicel.
While the Mexican PCS auctions were conducted similarly to the U.S. PCS auctions, there was one major difference: In Mexico, payment for the licenses is expected up front-before bid winners are handed the license. Mexican regulators learned that lesson from the U.S. C-block experience. In Mexico, 20 percent of the license payment was due within 30 working days after the bid award, with the remaining 80 percent due 90 working days following the award, Sept. 30.
“We will make the other 80 percent of our payment on Sept. 30, and if you can believe what you read in the local press in Mexico, we will be the only one of the new ventures who [has] the ability to make that … payment,” said Thom Degnan, vice president of venture development for Qualcomm Inc., which is one of the stakeholders in the Pegaso consortium, which received 10-megahertz or 30-megahertz PCS licenses in all nine regions of Mexico. Degnan spoke last week at the Latin American portion of PCS ’98 in Orlando, Fla..
The other stakeholders in Pegaso are Mexican media empire Televisa and entrepreneur Alajandro Burillo Aczarraga, who runs the Pegaso venture capital fund.
Degnan’s comment immediately was countered by Fulvio V. Del Valle, president and director general of Iusacell Digital, who said, “[Iusacell will] have the money to cover our license fee on Sept. 30 as well.”
However, Iusacell Digital, part of the Grupo Iusacell S.A. de C.V. group, probably is not considered one of the “new ventures” referred to in the local press. Iusacell, with Bell Atlantic Corp. as a major stakeholder, already is a well-established provider of cellular service in Mexico, with its major market Mexico City, where it competes with Telcel, the cellular division of Telmex. Iusacell currently has about 700,000 cellular subscribers in Mexico, according to Del Valle.
Iusacell purchased only two 10-megahertz PCS licenses in the auction-in region 1 (Baja California) and region 4 (northeast Mexico).
Telcel, which also won PCS licenses, also is expected to make its final payment this week.
Degnan and Del Valle said their companies both believe if companies do not make the final payment, they should not be given the licenses.
Del Valle said while he expects Iusacell to receive its PCS licenses in the next “coming days,” Iusacell has “stated to the government that there are some companies that are not [to] be paying. We have recommended to the government that those licensees should not be given. That’s our position.”
“We have spoken to Cofetel, and we have just asked Cofetel to enforce the rules of the auction,” agreed Qualcomm’s Degnan.
Degnan said Qualcomm was very pleased with the overall PCS auction process in Mexico.
“One of the key drivers in the success of our business case was that the auction process was very professional,” said Degnan. “It was planned, organized and implemented through Cofetel, (like) the FCC in Mexico, in about as professional an auction as I’ve seen.
“And that was very key, because at that point in time … the auction in Brazil did not come across as being successful. It was mired in legal activities, and investment bankers around the world were very skittish. So critical to securing the international investment into these organizations was a very professional auction.”
He said Cofetel educated the marketplace and had a firm set of rules it established well in advance of the auction. Cofetel even had a qualification process; of the 40 organizations originally expressing interest in the auction, just 14 finally were accepted to participate.
Pegaso and Iusacell plan to launch service beginning in the first quarter of 1999; Pegaso first in Tijuana, according to Degnan. Both companies are using cdmaOne, or Interim Standard 95 Code Division Multiple Access, technology. Iusacell is using equipment from Lucent Technologies Inc.
