AMX America Movil SAB de CV

MEXICO CITY—The Mexican government began the bidding process Friday for a wholesale network that officials expect will make mobile broadband service available to at least 85% of the population, while lowering Internet costs for operators and consumers.

The bidding rules come a year later than originally planned following field tests and a series of public consultations on the project, which was included in the 2013 overhaul of the country's telecommunications laws.

The network will use spectrum freed up by last year's switch from analog to digital television. The government will contribute the spectrum in a public-private partnership, with private partners putting up investment and financing to build the network, Communications and Transport Minister Gerardo Ruiz Esparza said at a news conference.

The government will charge heavily discounted rates for use of the spectrum. Telecoms regulator Gabriel Contreras said the lack of spectrum has been behind Mexico's slow development of mobile Internet.

Deputy Communications Minister Monica Aspe said estimated investment in the project will be from $3.5 billion to reach the minimum coverage and $7 billion in the event it extends to 95% of the population. Coverage will be the key factor awarding the project. Bids are expected in early August, with a winner to be announced later that month.

The network is expected to start operating in early 2018, reaching 30% of the population and extending to at least 85% after five years. At least 15% of the progress in building the network has to be in rural areas, covering towns with fewer than 10,000 inhabitants.

As of mid-2015, Mexico had 54.6 million mobile broadband subscriptions, or 45 per 100 inhabitants, according to regulators. Officials estimate the shared network eventually could double the number of people with access to wireless Internet.

The wholesale network will lease capacity on nondiscriminatory terms to mobile and fixed-line phone operators, and while existing operators can participate in consortia, they can't have any influence over the running of the shared network.

The success of the network will depend on how quickly it is built, and how attractive the costs are to mobile service providers who under current telecommunications laws have no incentives to expand into rural areas, said Jorge Negrete, head of the telecommunications consultancy Mediatelecom Policy & Law.

"Half of the country is disconnected," he said. "Mexico needs 50 million more mobile lines."

Once the Congress, in reforming the telecommunications laws, decided on the shared network as opposed to imposing coverage requirements on existing operators, the project became the only option, he added.

"The numbers don't work out when each operator has to reach rural areas with their own network," Ms. Aspe said. When there is a single network, with efficient spectrum such as the 700 megahertz band, costs are much lower. "That allows selling at lower prices to end users, and more people can afford to contract the service," she added.

Mexico's mobile market is currently divided among three main operators: Amé rica Mó vil SAB, Spain's Telefó nica SA and AT&T Inc.

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

(END) Dow Jones Newswires

January 29, 2016 15:55 ET (20:55 GMT)

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