AT&T is positioned to win customers in Mexico just as that market is becoming more lucrative, according to analysts at Barclays.
The No. 2 operator in the U.S. has moved aggressively into Mexico over the last year and claimed an estimated 8 percent of that market in December, according to the most recent data available. AT&T continues to invest heavily to build out its LTE network south of the border, Barclays said, and is also stepping up its marketing spending.
“Overall, we believe the carrier’s strategy is proceeding as planned and thus expect the carrier to be on track to potentially pull ahead of its 2017 network expansion and profitability achievement plans,” Barclays analysts wrote in a note to investors. “Market participants believe that the quality of AT&T Mexico’s network is still below where they’d like it to be, but our checks indicate that AT&T is rapidly deploying 4G, currently leading some competitors in terms of its 4G presence.”
AT&T’s LTE network covers 65 million POPs in Mexico and will likely reach 75 million POPs by the end of the year, Barclays said. The carrier offers service in some 100 markets including Mexico City, and it is said to be buying advertising space in high-end shopping malls to push its service.
“All market participants that we spoke with commented that AT&T is competing aggressively and continues to invest in the region and, therefore, we expect the carrier to continue to take share,” according to Barclays. “Given better-than-expected subscriber trajectory and progress on its network rollout plans, we wouldn’t be surprised if the carrier delivers on its expectations for profitability ahead of plan.”
Meanwhile, an ultra-competitive environment that had led to pricing wars seems to have eased recently, Barclays said. AT&T’s 6 GB plan costs $80 a month in the U.S., for instance, but only $25 in Mexico. Carriers have recently reined in their aggressive promotional campaigns, though.
“America Móvil commented that over the last several weeks, the carrier has seen a stabilization in pricing, echoing commentary it made during its 2Q earnings call,” Barclays analysts wrote. “The company has seen a pullback on promotions industry-wide with prepaid pricing specifically benefitting from shortened card lives.”
And AT&T has an advantage over its competitors because the carrier’s customer base is more inclined to be postpaid. Barclays estimated that 40 percent to 45 percent of AT&T’s customers in Mexico are postpaid users, while those users represent only 10 percent to 15 percent of its competitors’ customers.
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