:quality(75)/cloudfront-us-east-1.images.arcpublishing.com/bloomberglinea/BDMB7LRNNNDC3HML3V4NMV7FSQ.jpg "In Mexico, América Móvil has seen that, following the initial outbreak of the pandemic, there has been greater preference among consumers for the pre-paid model.")
Mexico City — Mexico and Brazil were the two largest markets in fourth-quarter 2021 in terms of users for the mobile business of América Móvil, the telecommunications company owned by Mexican billionaire Carlos Slim. But the two markets have shown themselves to be quite different since the outbreak of the pandemic.
They are “very different markets, and people think differently,” said Daniel Hajj, CEO of América Móvil, at a conference with analysts and investors on February 8.
Between October and December 2021, América Móvil added 4.8 million mobile subscribers.
Of those, 2.2 million were postpaid, customers who sign a contract for services and pay a monthly bill. The remaining 2.5 million were prepaid subscribers, users who pay in advance without having a contract that binds them to a monthly commitment.
Brazil contributed half of América Móvil’s postpaid additions, with 1.1 million customers in Claro’s mobile segment, while Mexico accounted for almost 50% of prepaid additions with 1.2 million new Telcel customers, according to the company’s fourth quarter report.
The preference for postpaid in Brazil and prepaid in Mexico has to do with specific market conditions, rather than to a differentiated commercial strategy in the two countries by the company, according to América Móvil executives.
In Mexico, América Móvil has observed that after the initial onslaught of the pandemic, there was a greater preference for prepaid, and which obeys a more cautious attitude on the part of users in the face of economic uncertainty. From the third quarter of 2020 onwards, the change of preference towards prepaid was significant for the company.
While in Brazil, postpaid has remained the modus operandi of preference over the last two years, despite the economic shocks linked to the pandemic. Due to the slowdown in the economy, customers are spending less than they previously did in prepaid, and shifting to postpaid.
“We have been the leaders in growth in the postpaid segment in Brazil. And in Mexico, yes, it was a change, but we can see that is the market situation, because nobody is growing too much in postpaid and growth has been more in the prepaid segment.”
Daniel Hajj, CEO of América Móvil
AT&T, América Móvil’s closest competitor in Mexico, added 889,000 mobile users in the fourth quarter of 2021, 96% of which were prepaid, according to the company’s quarterly report.
Read More: Mexico’s 2022 M&A Outlook Cloudier After Surge in Deals This Year
América Móvil executives said they are prepared for a potential change of preferences in Mexico and a return to postpaid, however.
América Móvil has increased its presence in the Brazilian market in recent years, following the acquisition of Nextel in Brazil in 2019. Now, the Mexican company is close to obtaining one-third of Oi’s mobile business operations, as part of a bid made in conjunction with competitors Telefónica and TIM.
Earlier this month, the transaction received approval from Brazilian regulatory authorities.
América Móvil will pay approximately US$3.22 billion for the transaction, which will enable it to add about 32% of the subscriber base of Oi’s mobile business.
“In one fell swoop, América Móvil will add more than 13 million subscribers in Brazil,” wrote Valentín Mendoza, an analyst at Actinver in a note.
Mendoza added that the most attractive aspect of the transaction for América Móvil will be to capture synergies, given Oi’s “solid prepaid base” in both average revenue per user (ARPU) and expenses.
Also Read:
