Among Axtel’s competitors in the communications sector are: Telmex, Televisa Telecom, Megacable, Totalplay, Transtelco and Maxcom, and other IT providers such as KIO, IBM, Scitum, Triara and Softtek.
In general, the telecommunications industry in Mexico is very competitive and, with the convergence of services, the competition that Axtel faces has intensified.
The company competes with suppliers that have greater financial resources and experiences significant pressure on rates.
At the end of 2020, Axtel, a subsidiary of Alfa, had more than 17,000 business clients in its portfolio, as well as government agencies and entities in Mexico; including national and multinational corporations, large and medium-sized companies from the financial sector, commerce, education, manufacturing, among others, and federal, state and municipal entities from the government sector.
That amount equals 1,000 less compared to 2019.
In addition, the company has important wholesale clients for its infrastructure unit.
In 2020, the top 10 customers accounted for 27% of the company’s total sales, up from 26% a year ago.
Likewise, the two largest clients accounted for 8% and 6% of total sales last year, respectively, the same percentages compared to 2019.
From the company’s perspective, pricing pressures have been and are expected to continue, primarily as a result of:
- More competitive market in the new normal.
- Competitors’ focus on growing their market share.
- Deployment of significant capital resources resulting in rate subsidies.
- Recent technological advances that allow substantial increases in the capacity of new and existing fiber optic networks, causing a surplus in transport capacity.
- Greater participation by competitors of traditional fixed telephony.
- Increases in long-term maturities with clients in exchange for benefits.
- The continuous convergence and grouping of telecommunications and IT services.
If there are additional reductions in the price of telecommunications services in Mexico, Axtel will be forced to react competitively by lowering prices or risk losing market share, which would adversely affect its operating results and financial situation.
Some of the competitors have more financial resources and scale than Axtel has.
In particular, América Móvil‘s national network and its concessions, as well as its established customer base, give it a substantial competitive advantage.
If an important client reduces or terminates its relationship with Axtel in the terms contemplated in the respective contracts, it could affect Axtel’s financial situation, income and results of operations. No other customer accounted for more than 5% of total revenue.