CFE Telecom, close to becoming a public company, but the industry sees risks

Expansión requested a position from Telefónica and AT&T but they were not available for the publication of the text. While Telcel said it will not comment.

The International Chamber of Commerce Mexico (ICC Mexico) warned that the modification of the legal nature of state companies threatens investments, innovation and consumer protection in the telecommunications industry.

“We support that there is a reform that promotes universal access to internet service, but we emphasize the importance of doing so without compromising competitive neutrality in the sector. We consider it essential that clear guarantees be provided to the industry,” said the ICC Mexico in a press release.

For the International Chamber of Commerce Mexico, declaring internet access as a strategic activity could exclude other market operators, disproportionately benefiting the state provider and ultimately harming the final consumer.

“Although the participation of the State is legitimate, it must occur under conditions of equality, without subsidies or advantages that distort the market,” he warned.

The Mexican Association of Mobile Operators has also expressed its concern about the change in the legal status of CFE TEIT. The entity told Expansión that the still state-owned company has operated in the last two years with advantages through rates that are well below the market, thanks to the infrastructure and income sharing agreement it has with Altán Redes. But this has resulted in complications for replicating prices by large operators and for self-managed projects that were considered the only option for remote sites.

Read also: The future of CFE Telecom: Internet for everyone or risk for competitors?

Added to this is the disobedience of the state company to offer services where it has clear restrictions as part of its concession.

“Problems are arising and we are working because it is a very thin line that marks that balance. If CFE Telecommunications and Internet for All is not controlled, it could affect and break the market that we are having because today it is undoubtedly a service that we sell and it gives away,” warned the president of the Mexican Association of Mobile Operators in response to the express question of Expansion.

What changes for CFE TEIT when it becomes public?

Until now, CFE Telecomunicaciones e Internet para Todos is only allowed in its concession to operate and deploy infrastructure in places where operators such as Telcel, AT&T and Telefónica do not reach, whose restriction has been breached.

Experts previously consulted by Expansión agree that converting CFE Telecomunicaciones into a public entity would imply that the company would no longer have the limitation of marketing telecommunications services where large operators operate and would even sell its products at more affordable prices, compared to the rates of the market, since they would be subsidized by its own, giving it an advantageous position.

But the project would shield this part, by pointing out that “the Internet service provided by the State will not be classified as a monopoly, it addresses the need to guarantee the right of people to access information and communication technologies, including broadband internet, without implying an economic benefit, but rather a State responsibility.”

With the change in legal status, the budget could increase. Converting CFE Telecomunicaciones into a public company implies that it receives greater resources from the public treasury and even more to make the telecommunications business profitable, but without the obligation to make financial information transparent.

The main intention of the initiative is to modify the mode of operation of CFE Telecomunicaciones, but also to prevent it from being forced to make its finances of the connectivity project transparent. Until now the company has avoided sharing information with the regulator itself about the progress of its project, arguing that “it cannot be forced to deliver reports.” The only resource that has served to access the operational and financial details of the company is transparency, but it is also one of the autonomous entities that the president seeks to eliminate.

So far CFE TEIT is not profitable. At the end of 2023, the company lost 8,931 million pesos and added 150,000 users with a goal of one million customers by 2025, according to data obtained via transparency. This has led the company to estimate that it will achieve business profitability in remote areas within 20 years, while in larger markets it would achieve it in a decade, revealed a source with knowledge of the matter but who asked not to be identified.