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Mexico Telecommunications: Red Troncal Project Bid Update

Author:Mr Raúl Fernández-Briseño
Profession:Mayer Brown
 
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Keywords: Mexico City; Americas; Technology, Media & Telecommunications; Infrastructure; Projects

We understand that during mid-June, the final bidding guidelines are scheduled to be released for Mexico's telecommunications backbone network (Red Troncal) project, approximately a year after the federal agency Telecomm released draft guidelines for the contract award. One of the constitutional reforms approved during President Peña Nieto's administration, the Red Troncal is intended to promote greater competition between telecommunications service providers and to increase the coverage of and improve the quality of these services in Mexico.

The Project

The Red Troncal will be a 25,000-km fiber optic wholesale network through which its operator can offer capacity services only to concessionaires and resellers (such as mobile network operators, fixed network operators and fixed and mobile virtual operators) but not to end users.

The project will include the award through a public-private partnership (asociación publico-privada) of a contract for the design, financing, installation, deployment, operation, refurbishment, maintenance, growth (including "illuminating") and commercialization of a pair of fiber optic strands owned by state-owned electric utility CFE (throughout 25,000 km nationwide) as well as to access to "hotels" (hoteles de interconexión) and rights-of-way, with the contractor bearing all costs related with the project, including the contribution of all assets, rights, infrastructure, equipment and licenses, related to the installation, deployment and operation of the network. Simultaneously, the winning bidder will receive a license (concesión única) to render wholesale-broadband access services with a 30-year renewable term. If spectrum is necessary for last-mile connections, a separate license would be granted.

It is expected that investment for the Red Troncal will be a 70:30 debt-to-capital ratio. It is also expected that no restrictions as to potential bidders may be imposed, other than to incumbent operators.

Preliminary Guidelines

A draft of the bid guidelines has been published on the Telecomm web page (http://www.telecomm.gob.mx/rtroncal/download/english-pre-bases-red-troncal-english-version/), pursuant to which a performance bond for $200 million pesos will need to be submitted by all bidders (considerably lower to the bond for the Red Compartida project, which was $1 billion pesos).

Bidders shall propose a minimum...

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