Telefónica Argentina Investment Satisfies Data Demand
The Argentine branch of Spain's Telefónica will invest ARS10bn (US$2bn) over the next two years to expand and upgrade its wireless and broadband network to satisfy growing demand for bandwidth. The Argentine market is fiercely competitive, with three major players holding roughly equal market share and a new entrant, state-owned Arsat, could threaten incumbent operators. BMI believes continued demand for data in Argentina will continue to drive revenues, requiring significant investment to increase coverage and provide faster speeds for consumers. Telefónica's US$2bn investment recognises this trend and should place it in a good position to ensure it remains competitive.
Telefónica plans to deploy 1,000 fibre-optic nodes in 2013 to offer residential broadband speeds of 40MB and to install fibre-to-the-building (FTTB) technology for its corporate and government clients. The broadband market continues to grow in Argentina, and Telefónica's bundled packages have secured a lead role as a broadband provider. Under the company's mobile unit, Movistar, it plans to increase the number of nodes by 80% to 7,500 across the country, increasing voice and data transmission capacity. This will ensure the network can handle growing demand and avoid any network outages, for which Telefónica was fined US43mn by the Argentine government. The use of fibre cabling should allow for backhauling resources, providing consistent high-speed services.
|Demand For Data Driving Revenues|
|Non-Voice Revenue As % of ARPU Vs Non-Voice Revenue (EURmn)|
Growth of 3G services has been particularly strong in Argentina, placing it among the most advanced in the region. This growth has seen the rise of data revenue as a proportion of ARPU, accounting for 46.1% of mobile ARPU revenue for Movistar in Q312. BMI forecasts data is going to be driving revenues and subscriber demand, so ensuring the network is capable of catering to this demand will be extremely important for operators. Movistar has the highest proportion of postpaid users among operators in Argentina, 38%, as of Q312, making up for its gradual loss of market share, down to 29.1% in Q312 from 38.9% in Q305. Postpaid users are likely to spend more money and require more data. Therefore, an investment by Telefónica into network capacity is a move in the right direction. Figures for data usage and 3G handsets are set to rise, as prices fall through greater competition in the market.
Argentina is becoming increasingly competitive, following a similar investment by Claro in network infrastructure, as well as the entry of Arsat into the mobile market. Although this investment is unlikely to alter the competitive landscape, it should place Telefónica in a strong position for the long-term and is evidence of a sound strategy.