Mexico Faces New MMDS Auction

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Mexico City -- Mexico's government will demand stiffer
financial guarantees from companies bidding for wireless cable-TV licenses, following the
disqualification of three concession winners that failed to pay up on time.

Three separate companies -- Astiazar, Rojano and TV
Espectro de San Luis -- defaulted on the first payments that they were scheduled to make
for a total of 28 concessions that they won in Mexico's first-ever auction of MMDS
(multichannel multipoint distribution service) spectrum. According to the rules of the
auction, which started in December and concluded in February, the companies that bid the
most won the concessions. But bidding high is no guarantee of success if it's not
possible to make good on the financial pledge, as the three companies that were
disqualified discovered.

TV Espectro, which walked away with 24 concessions -- the
highest number snagged by any one company -- now faces the embarrassment of having them
taken back.

TV Espectro's 24 concessions, along with the three won
by Astiazar and Rojano's single concession, will all be reauctioned. Burned by the
experience, the government will be more cautious the next time around. While the date of
the new auction is not yet fixed, what is firmly set are more stringent conditions
attached to proving financial solvency. "The higher participants bid, the greater
financial guarantees they'll have to produce to prove that they are serious,"
said Gena Dalma, who supervised the auction for Mexico's Federal Telecommunications
Commission, or Cofel, the government agency that handled it.

None of the disqualified companies was available for
comment. However, a person involved in the auction speculated that TV Espectro's
United States-based backer, Wireless Mexicano Inc., did not deliver on its financial
pledge.

The payment problems were not so surprising, given the
exceptionally high prices that were bid for the licenses, said Ignacio Rodríguez, vice
president of Mexico's largest MMDS operator, MVS Multivisión. That company withdrew
from the auction precisely because it considered the concession prices too high to make
good business sense.

Other industry players added that the immaturity of
Mexico's MMDS industry -- which is still largely provincial and family-owned -- was
another reason for the payment problems.

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