Operators Must Look Beyond Traditional Services

Trends in the Latin American mobile market favour new strategies for the region's operators as the potential to grow connections diminishes but new technologies encourage greater usage. New technologies open different avenues for generating new incomes, seeing information and communication technology (ICT) supporting the growth potential of a number of new industries. Nevertheless, BMI believes consumers will remain the key drivers for operators' revenues over our five-year forecast period.

Latin America's vast mobile subscriber growth trend has passed its peak, slowing to a more sedate 3% average growth rate across the region in 2013, a vast difference from the 22.3% average five years earlier. BMI forecasts show few markets generating growth over the 2014-2018 period, with Argentina, Chile, Ecuador and Uruguay reporting less than 1% growth by 2018. Only Brazil offers real potential, with 3.4% average growth forecast between 2014 and 2018, all the more appealing as it has the region's largest population. Bolivia and Paraguay have higher rates of growth, but their lower ARPUs and smaller populations restrict the potential for increasing revenues alongside this growth.

BMI's forecasts highlight the challenges facing Latin America's mobile operators América Móvil, Telefónica, Millicom International Cellular and a number of local players. The growth remaining in the region's markets is either in rural areas that are hard to reach or among low-income subscribers offering low returns; often the circumstances are linked, compounding the problem. Government requirements to ensure networks reach rural areas will see mobile growth continue outside major towns and cities but BMI expects operators to increasingly focus on generating more revenues from their existing subscribers in order to expand revenues.

Expansion Opportunities Diminished
Mobile Growth (%)

Trends in the Latin American mobile market favour new strategies for the region's operators as the potential to grow connections diminishes but new technologies encourage greater usage. New technologies open different avenues for generating new incomes, seeing information and communication technology (ICT) supporting the growth potential of a number of new industries. Nevertheless, BMI believes consumers will remain the key drivers for operators' revenues over our five-year forecast period.

Latin America's vast mobile subscriber growth trend has passed its peak, slowing to a more sedate 3% average growth rate across the region in 2013, a vast difference from the 22.3% average five years earlier. BMI forecasts show few markets generating growth over the 2014-2018 period, with Argentina, Chile, Ecuador and Uruguay reporting less than 1% growth by 2018. Only Brazil offers real potential, with 3.4% average growth forecast between 2014 and 2018, all the more appealing as it has the region's largest population. Bolivia and Paraguay have higher rates of growth, but their lower ARPUs and smaller populations restrict the potential for increasing revenues alongside this growth.

Expansion Opportunities Diminished
Mobile Growth (%)

BMI's forecasts highlight the challenges facing Latin America's mobile operators América Móvil, Telefónica, Millicom International Cellular and a number of local players. The growth remaining in the region's markets is either in rural areas that are hard to reach or among low-income subscribers offering low returns; often the circumstances are linked, compounding the problem. Government requirements to ensure networks reach rural areas will see mobile growth continue outside major towns and cities but BMI expects operators to increasingly focus on generating more revenues from their existing subscribers in order to expand revenues.

Our ARPU forecasts show an overall expected decline in ARPU across the majority of markets as the pressures mentioned above bring down the overall expected revenues per subscriber. Chile and Colombia stand out as markets bucking this trend. The reasons behind this vary considerably as Chile's more developed economy and earlier take-up of 3G and 4G services have seen operators stabilise revenues early. Higher spending subscribers are easier to encourage to spend more on services, particularly data and the myriad of applications now available on mobile handsets. Colombia's upwards trend reflects a refocus by the market's players on postpaid subscribers, showing how ARPUs can boost the market.

Reversing Decline Must Be Operator Focus
Market Blended ARPU (USD)

With fewer new subscribers available for operators to target, refocusing on encouraging existing subscribers to spend more is one avenue for players. New trends in consumer telecare, mobile financial services and telematics offer operators a means to embed mobile services further into the day to day lives of their subscribers. However, Latin America has seen a number of smart city initiatives and innovations that will see operators generate new income from other services. The number of connections on their networks will likely increase, as machine-to-machine (M2M) communications that manage logistics, transport, power grids and digital advertising boards, expand and see more devices connected.

Chile stands out as the region's leader as its operators are successfully growing ARPUs, which will support network expansion demands. Countries facing decreases in ARPU such as Argentina, Peru and Ecuador offer lower returns as growth potential will not make up for decreasing average spending. Mexico's more stable ARPU outlook, coupled with greater growth potential, makes it one of the more interesting markets in the region, although BMI notes that new regulations remain largely untested and the market's dynamics are as yet unchanged.

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This article is tagged to:
Geography: Latin America, Argentina, Bolivia, Brazil, Chile, Colombia, Ecuador, Mexico, Peru, Paraguay, Uruguay, Venezuela
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