August 20th, 2012. Skype recently announced on its blog that it was releasing prepaid subscription cards, dubbed simply Skype Cards. The company is rolling out two types of cards, one, which is an unlimited subscription for calls to United States mobile and landlines, and costs USD 7.50, and another, which provides flexible Skype credit and costs USD 11.50. These products introduce a new competitive option for users that lack credit cards to access Skype’s low local and international calling rates in Mexico’s highly noncompetitive telecommunications market.
According to the Banco de México, somewhere between 90 and 100 million people in the country do not have a credit card – previously a requisite for completing purchases of Skype credit. The low credit card penetration has clearly contributed to and paralleled the high rates of prepaid mobile phone usage: in Mexico, 85% of mobile phones are prepaid. Skype has taken this prepaid trend to heart and based its recent innovation in payment methods on the conditions of the local market, creating a point of access for millions of new users.
The Mexican telecoms market is positioned to benefit from the introduction of new competitive consumer options. As reported by Bloomberg News earlier this year, Mexicans were overcharged by the phone industry $13.4 billion per year between 2005 and 2009. Recently, Mexico’s Federal Competition Commission (CFC) declared Telcel as the dominant market player, opening it to asymmetric regulation by the Federal Telecommunications Commission (Cofetel). Regardless, the mobile market remains in the hands of very few players, affecting consumers greatly.
Does this new prepaid option being offered by Skype really have the potential to disrupt the Mexicans telecommunications market? Unfortunately, the answer is probably not, at least not in a big way.
First, it is important to remember that Skype is still an Internet-driven service, and Mexico’s Internet penetration rates are still below the regional average at 36.9%. While the prepaid Skype Cards overcome one barrier to accessing Skype’s service, simply having an Internet connection can present an even greater barrier for millions of potential users. This limits the potential for the service to become a big player in the market. Second, while Skype’s rates for calling internationally are extremely competitive, it is less clear how competitive they can be on domestic calls. Calling Mexican mobile phones from Skype still costs 33.6 cents per minute, way above rates for mobile-to-mobile calls with all Mexican carriers.
Regardless of whether Skype can disrupt the Mexican mobile market in its entirety, the introduction of prepaid Skype Cards in Mexico will provide a clear benefit to consumers, especially those that have family or friends abroad. We are excited to see how uptake of the Skype Cards progresses, to see what lessons or new innovations can be designed for the mobile market in Mexico.