UPDATE 1-Mexico ponders re-auctioning spectrum in 40MHz chunks

By Cyntia Barrera

MEXICO CITY Aug 14 (Reuters) - The Mexican government said on Tuesday it plans to re-auction the coveted 2.5 GHz band, possibly in chunks of 40 MHz, to allow a broader number of companies to take part in the process, Deputy Communications Minister Hector Olavarria told Reuters.

In a surprise announcement last week, Mexico said it was reclaiming the 2.5 GHz band, ideal for servicing data-hungry devices like tablets and smartphones, from 11 companies that currently hold 68 licenses to operate in that band.

Privately-held MVS Comunicaciones, which struggled for years with the government over how to make better use of the bandwidth, holds 42 of those licenses, 15 percent of which have already expired.

Olavarria said that according to recommendations from the United Nations' International Telecommunications Union, one of the best ways to re-auction the band would be in chunks of 40 MHz but that would not be final until the government and regulators conclude a thorough analysis.

The spectrum cap that authorities set will be crucial to determine if existing, large Mexican telecoms like tycoon Carlos Slim's America Movil or broadcaster Televisa, can bid for added capacity in the 2.5 GHz band when the government makes it available, given existing limits on the size of total holdings.

The government has said it aims to recover the spectrum within five months. But Olavarria warned that it might not be possible to recover all the capacity in the end.

So far, the ministry has held talks with one licensee, Ultravision, he said.

MVS, which will suffer the biggest hit from the government's decision, said in an internal memo quoted by local media on Tuesday that it will vigorously defend itself against the authorities' move.

MVS declined comment. The company has scheduled a press conference on Wednesday where management is expected to reveal how they will approach the problem.

Despite the government's plans, the recovery of the spectrum could take years, meaning Mexicans won't be able to get an alternative wireless broadband backbone, and better services at lower prices, for a while.

It also means the problem will likely fall in the lap of the the new administration when incoming president Enrique Pena Nieto takes office in December.

"We want to leave a very transparent list of the steps we are following so that when the new team arrives to the ministry it has a clear idea where we were headed," Olavarria said.

Companies that hold licenses to operate in the 2.5 GHz spectrum have the right to legally challenge the government's decision. Additionally, MVS has several pending appeals in courts over expired licenses that it wanted to revive but the government refused to renew.