But first you have to encourage them to get involved. How is Mexico doing that? First, they created a new and autonomous regulator, IFT and then gave it the power to revoke operating licences from companies using monopolistic practices. This allows IFT, together with the Federal Commission of Economic Competition, to enforce one of the reform’s main aims – to stimulate competition in Mexico’s telecoms industry (but more on that next time). Next came the lifting of restrictions on direct foreign investment – up to 100% in telecommunications and satellite communications and 49% in the broadcasting sector, clearly marking a paradigm shift in direction.
A good start, undoubtedly, but there’s more to do yet! Mexico has spent a long time limiting or deterring foreign direct investment, so it’s going to take some time to win it back. Investors will be comparing opportunities there with other economies that have been actively pursuing foreign capital for years. Investors will still seek to de-risk their investments as much as possible, with many less interested in what they are actually investing in, and more interested in the returns it can bring (quite rightly, one might argue). Even within Mexico, there’s stiff competition for capital, particularly with the opening up of its energy sector, a popular asset class with foreign investors.
It also depends on how long investors are willing to wait for their money. It seems that infrastructure investment is a key motivator for the opening up of the sector, and infrastructure investments can require a long-term investment view.
Ultimately, it’s all up in the proverbial air at the moment, but one thing’s for sure – Mexico’s telecoms industry is entering a renaissance period, and there are exciting opportunities there for those who have the appetite. Join us in October at our Mexico Telecoms Briefing to find out more about what they are.