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MEXICO CITY—The Mexican government awarded a license to develop a multibillion-dollar wholesale mobile network to a group formed by several investment funds and the World Bank's private-sector arm, a capital-intensive project seen as crucial for Mexico's ambitious plan to expand internet access.

The Communication and Transport Ministry on Thursday granted network development and operating rights to Altá n, a group led by Spanish telecommunications businessman Eugenio Galdó n, an infrastructure fund managed by a unit of Morgan Stanley Investment Management and the China-Mexico Fund, which is run by the IFC Asset Management Company.

The wholesale network, which will act as a carrier-of-carriers providing mobile broadband capacity to operators, will use spectrum freed up by last year's switch-over from analog to digital television signals.

Investment in the project is expected to surpass $7 billion to reach more than 92% of Mexico´ s population.

The concession is for 20 years, and can be renewed for a further 20. Altá n said it expects the network to start operating in March 2018.

The project, which the government says will increase the number of Mexicans with access to wireless internet and lower costs, is seen by market watchers as a highly risky venture that would require extensive investment to meet uncertain demand.

The bidding process was questioned by U.S.-based Rivada Networks, which was disqualified because it didn't provide the required financial guarantees when it submitted its technical offer on Oct. 20, leaving Altá n as the sole bidder.

Rivada said the process favored its competitor and that it is suing to have its bid reinstated. The ministry and Altá n said the process was transparent and complied with regulations.

Altá n said the new network will enable access to the most advanced technologies and ensure "service in areas where traditional operators either do not reach at present, or where providing to these areas is not profitable."

The new wholesale network will also level the playing field in the broadband and telecommunications market and attract foreign direct investment, according to the ministry. But some experts say it won't provide services to final users and it is unlikely to generate strong demand from virtual operators that would lease network capacity.

"In a way, you are creating a segmented monopoly because it takes a portion of the spectrum and it becomes the sole player using these resources," said Ernesto Piedras, head of The Competitive Intelligence Unit, a Mexico City consultancy.

Axtel SAB, a unit of conglomerate Alfa SAB, said the shared network has the potential to transform the country's information technology and telecommunications ecosystem. The company, which has a small nonvoting stake in the consortium, said it plans to add mobile to its corporate and retail service offerings, while exploring opportunities in other markets and services in Mexico.

But market participants doubt the project will be profitable enough as local networks overlap.

"Investment would go to coverage requirements that are almost identical to the one that we have right now," said Francisco Gil Dí az, Mexico's former finance minister and a director of Telefó nica Mexico. The unit of Spain's Telefó nica SA and its two chief local rivals—Amé rica Mó vil SAB, AT&T Inc.—have invested billions of dollars in their own high-speed networks at a time when global telecommunications markets are consolidating networks.

Amé rica Mó vil is Mexico's biggest mobile operator with 72 million subscribers, followed by Telefó nica with 26 million and AT&T with more than 10 million. Mobile virtual network operators have another 895,000 subscribers.

"The spots with significant telecommunications traffic are mostly covered, there are no dead spots," Mr. Gil Dí az added.

AT&T said it is continuing with its $3 billion investment to expand its high-speed Mexican network. "We'll continue to monitor this project as we move forward with our plans in Mexico; if the [shared network] has coverage in an area where we don't, we would certainly consider using it," the U.S. company added.

Amé rica Mó vil declined to comment.

Write to Anthony Harrup at anthony.harrup@wsj.com

(END) Dow Jones Newswires

November 17, 2016 15:35 ET (20:35 GMT)

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