Mobile minded: working- and middle-class cell phone users fuel big boom for the wireless market. (Tech Talk).

Miguel Rosas' fruit stand in downtown Mexico City has been wired with electricity for less than four months. He doesn't have a television or air-conditioning, and washes dirty dishes in a bucket of soapy water on the floor by a sack of limes. But he does own one modern amenity that he says has made his life much easier--a cellular telephone.

"I have some clients a few blocks away who just call me when they want to order fruit," says Rosas. "I wouldn't even know how to get a regular telephone hooked up here."

As costs come down and access becomes greater, more and more working-and middle- class Mexicans are entering the wireless market, making it the fastest growing in Latin America. Last year, there were over 21 million cell phone users in Mexico, which easily surpasses fixed lines, and industry analysts expect the number to grow by 17% this year.

"We only expect mobile lines to keep outpacing fixed lines," says Cesar Jimenez, an analyst with technology tracking firm Select-IDC.

THE BIG BANG 

According to a report by the Yankee Group, the explosive growth of cell phone use forced operators to widen their scope to target the middle class, over 80% of the population. The move should also push dominant telecommunications company Telefonos de Mexico (Telmex) to increase the country's excruciatingly low telephone penetration, just 13.4 million fixed lines in 2001.

Ordinary Mexicans burst into the wireless scene in 1996 when Telcel, the cellular phone unit that in 2000 was spun off by Telmex under the name America Movil, began selling its popular "Amigo Kit," affordable phones packaged with pre-paid cards. The phones were an instant hit with users who neither had to sign long-term contracts nor own credit cards. The unique strategy has helped push the market to over US$4 billion last year, up from US$3 billion in 2000.

"The prepaid system has been the determining factor to our growth," says Patricia Ramirez, a spokesperson for Telcel, which controls over 70% of Mexico's cell phone market.

MARKET ANGLE

But the clincher for the Mexican market has undoubtedly been the operating scheme launched in 1999, "El que llama paga," or "Caller pays." From then on, anyone who wanted wireless communication could just buy a phone and receive all the calls they wanted without being charged. But the feature has one obvious drawback for operators: With as many as half of Mexican users only receiving calls, operators are denied a big chunk of earnings generated by making calls from cell phones. Analysts say this will be a big concern to operators as the market continues its stratospheric ascent. "If they're not worried about it already, they should start," says Jimenez.

But it hasn't stopped a flurry of new operators from trying to elbow their way into Mexico's market, expected to reach 36.5 million users by 2006, according to the Yankee Group. In January 2001, Vodafone bought a 34.5% stake in Mexico's No. 2 cellular operator Grupo lusacell. Months later, Spanish-telephone giant Telefonica bought itself the No. 3 position in the Mexican market with the acquisition of four of Motorola's wireless service operators in northern Mexico, for US$1.8 billion. Then in March 2002, Telefonica agreed to buy a majority stake in cell phone operator Pegaso, a deal that would put the Spanish company in No. 2 place in the Mexican market.

But for the immediate future, the industry will be focused on one goal: getting Mexican users hooked on data transmission services like instant messaging and web surfing. Analysts say the desire for data transmission, coupled with expensive PC prices, will only push more consumers to go wireless. Most large Internet companies, including portals run by television network TV Azteca and Telmex, offer content for wireless devices via wireless application protocol (WAP). And while it remains unclear when the Mexican wireless industry will be able to offer third-generation services, operators are confident Mexicans will embrace the new technology as enthusiastically as European and Japanese consumers.

"The evolution won't be voice, but data," says Telcel's Ramirez. "It's already happening."

Stevenson Jacobs is a freelance writer and a reporter for a Mexico City daily.