In announcing an auction of 4G spectrum due for 2013, Argentine Planning Minister Julio de Vido stressed that government-owned Arsat, would retain an 'important' quantity of the spectrum. This follows a decision to award 25% of the country's 3G frequencies to Arsat, indicating that the government intends the company to be a serious competitor in the mobile market. While BMI believes the new competitor could prove a welcome short-term addition, existing operators, particularly Movistar, may be at risk from a potentially powerful player in the long term.
The mobile sector in Argentina is one of the most advanced in the region, with a penetration rate of 144.63% as of Q312 and a growing 3G market. BMI expects a slowdown of this growth towards the end of our five-year forecast period to 2017 as the market matures and becomes saturated. However, Arsat has placed itself in an ideal position to succeed as this takes place. Its main rivals, Movistar, Claro and Telecom Personal, have a fairly even market share, split 29.1%, 36.3% and 31.8% respectively as of Q312. However, these figures have been stagnant since Q111, and a new player could help to stimulate the competition and encourage economic growth.
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BMI regards Movistar as the operator most at risk from this increased competition, as it has underperformed in net subscriber additions by comparison. This has led to market share falling consistently since Q309, as well as a fluctuating ARPU, which dropped from EUR45.5 in Q311 to EUR37 in Q312 (US$50.20 to US$43.58). Although there has been some recovery since then, it has allowed Telecom Personal to overtake Movistar. The decision not to auction spare 3G frequencies will also hit Nextel particularly hard, as the company requires additional spectrum to catch up with its larger rivals 3G networks.
In the long term, as the market matures, Arsat stands to benefit with its significant quantities of 3G and 4G spectrum. Additionally, the government has appointed Arsat to manage 'Argentina Conectada', an 80,000km network of broadband fibre optic cables, which is a useful backhauling resource. With the capability to attract subscribers from rural regions through subsidised prices and reliable coverage, Arsat is not likely to be affected by a slowdown in the telecoms sector in the short term. Claro's high level of 3G coverage should also allow it to prevail, whereas the outlook for Movistar and Telecom Personal is unclear.
In response to the struggling economic recovery, the Argentine government has significantly increased its intervention in the oil, electricity and now telecoms markets. The expectation that Argentina will default on foreign debt payments in December 2012, could provide impetus for further intervention in the private sector. The major telecoms operators may appear to be stable now, but Arsat's potentially dominant resources could change everything.