NEW YORK-“There is no question that, with no bank or bond market to finance your start-up, you need either to be crazy or have a well thought out plan,” said Patricio Jimenez, chief financial officer of Telinor, a fledgling wireless local loop carrier in Mexico.
Telinor believes it has a strategy sufficiently sound to convince equipment vendors to fill the temporary financing void, he said at the recent “Latin American Telecom Finance 1998” meeting, sponsored by IBC UK Conferences Ltd., London.
“Telinor is well-capitalized, has a good partner, an intelligently thought-out plan, and it is on track,” said Sean P. McDevitt, a principal of Cambridge Strategic Management Group, Cambridge, Mass.
With backing from Bell Canada International, its operating partner, Telinor plans to launch commercial service by early next year in three major metropolitan areas-Guadalajera, Mexico City and Monterrey.
“We have $250 million (in start-up) equity, and we had a 10-year plan for 210 service areas, but we ended up downsizing it,” Jimenez said.
Telinor won a nationwide license at 3.4 GHz that can be used either for fixed wireless or personal communications services. Eventually, it plans to offer WLL in 200 additional service areas, provided capital is available to do so, he said.
“We thought we would go to the bond markets, but we couldn’t,” explained Jimenez. “This is hard on the poor vendors. My heart goes out to them because the question is whether the vendors’ (credit ratings) will be downgraded or not.”
“They are becoming extremely more selective as to financing projects, looking for those that are key to new business opportunities. They all want to make a showcase of their products for [WLL].”
Today, Mexico has a $9 billion annual telecommunications market, about 40 percent each from local and long-distance wireline services and the rest divided among paging, cellular and satellite telecommunications, Jimenez said. Business customers account for about 22 percent of the access lines and 60 percent of revenues.
“Local service was delayed from the beginning because long distance was given priority,” he said.
“We waited for wireless to be a primary (local service) solution, so we needed to wait for spectrum auctions. The fixed wireless access and PCS auction was a very slow, torturous process, with the winners announced in May.”
Mexico, whose auctions went on at about the same time as those for the B-band cellular licenses in Brazil, pursued a different philosophy in order to promote competition, McDevitt said. Instead of breaking up the dominant carrier, as happened in Brazil, Mexico left Telmex, the former government-owned monopoly, “pretty much alone, but licensed many competitors,” he said.
“Mexico effectively auctioned off six new competitors to compete with three incumbents … in each of the nine regions.”
With the choice of using the auctioned spectrum either for WLL or PCS, Jimenez said Telinor’s strategy is to build the fixed wireless portion, then possibly pursue a partnership with a facilities-based PCS carrier.
In fact, liaisons among fixed and mobile wireless carriers likely will be part of a consolidation trend he believes is imminent in Mexico.
“It probably will happen soon. It makes the most sense for it to happen now. It probably is the most efficient way to attack a big giant like Telmex.”
Prospective investors in Mexico’s telecommunications market should consider favorably two facts, McDevitt noted. First, its wireless licenses were inexpensive compared with those auctioned in Brazil, partly because Brazil’s auctions diverted attention and money from Mexico.
Furthermore, compared with countries like China and India, “which are over-served relative to (per capita) income, Mexico is a large market with constrained infrastructure relative to (per capita) income,” he said.
“Countries in the middle, (like) Mexico, Brazil, Chile, Russia and Venezuela, are the most interesting from a telecommunications perspective.”
