China telco eyes bid for new Mexico network

China Telecom, the country's third-largest carrier, is preparing a possible bid for a contract to build and run a new mobile broadband network in Mexico and is seeking local partners to join it in a consortium, three people with knowledge of the matter said.

It has already secured up to several billion dollars of financing from Chinese state-controlled banks, including the China Development Bank, for the project, which Mexico estimates will cost US$10 billion over 10 years, one of the people said.

The proposed network is part of a sweeping reform to break billionaire Carlos Slim's hold on the Mexican telecoms business, some Mexican officials say.

Mexico is trying to ease its economic dependence on the United States and ramp up Chinese investment. A Chinese-led consortium looks poised to win a US$3.75 billion contract to build a high-speed train system, sources with knowledge of the plan say. This is despite the group's previous winning bid being revoked late last year amid a political scandal.

On a trip to China in November to reduce tensions caused by the train contract cancellation, Communications and Transport Minister Gerardo Ruiz Esparza also discussed the mobile network plan with the Chinese government, according to a ministry press release.

State-owned China Telecom's international subsidiary China Telecom Global wants to be an operating partner in the network and not just an investor, said the people, who requested anonymity.

It is still looking for Mexican partners, the people said. It was unclear who had been approached.

The people did not say how big a stake the Chinese would take in the consortium that would make the bid. Under a government timeline published last year, the tender should have begun last month, with a winner due to be chosen in August this year.

Creation of the wholesale network was written into Mexico's constitution as part of telecom market reforms in 2013. It aims to allow Slim's mobile competitors better coverage without using the network of his company America Movil, or bearing the cost of building their own.

Under current plans, Mexico's government will not take a stake in the company that runs the network, according to two of the sources.

Instead, the winning group will have a public-private partnership contract with the government which will allow it use of some state infrastructure.

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