VAS Monetisation Pays Off For Independents

BMI's long-held view that the Latin American region holds great potential for non-voice mobile value-added services (VAS) continues to play out. Besides noting rising usage of such services, operators and distributor partners have observed growing sales of smartphones and other connected devices. However, despite these positives, operators are struggling to monetise VAS, a difficulty highlighted by the latest results from mobile content vendor Mobile Streams, a company that sees more opportunities in the open mobile Internet application ecosystem.

Although based in the UK, Mobile Streams focuses mainly on Latin America, where it provides content distribution and carrier billing services for many of the region's largest mobile network operators. Its revenues increased by 14% in the six months to December 31 2013, to GBP27mn. Of that figure, GBP25.8mn was derived from its open mobile Internet business. This was up by 20.6% over the six-month period and was driven, it says, by consumers' shift away from operator-specific to open access smartphones and tablets.

Smartphones A Double-Edged Sword For Operators
Smartphone Shipments Per Annum ('000)

Mobile Streams was serving 4mn billed active subscriptions in Latin America at the end of 2013, up from 2.7mn a year earlier. The vast majority of those subscriptions are found in Argentina, but Mexico represents its fastest-growing market, with subscription numbers up by 154.2% y-o-y to 300,000. Negative subscription growth was seen in Colombia, however, down by 18.5% to 75,000, while the contribution made by its nascent Brazilian activities was 'immaterial'. By contrast, Telefonica-owned Movistar saw non-voice service revenue growth stall in Argentina in 2013, while revenue in Mexico contracted markedly.

BMI expects Mobile Streams and its peers in the third-party content distribution market to continue benefiting from rising demand for smartphones in Latin America, particularly among consumers in the low to medium income classes. Independent content providers and distributors are those that are locked out of premium content platforms such as Apple's iTunes and Google's Play. With iPhones and iPads remaining well out of the reach of most consumers in Latin America and with Google Play-optimised Android-powered devices typically aimed at middle income consumers, the rest of the market is being served by cheap Asian or locally-made imports that leverage third party content portals, such as those served by Mobile Streams.

BMI forecasts smartphone shipments to rise from 3.334mn per annum in 2013 to 11.767mn in 2018 in Argentina and from 2.345mn to 8.834mn in Mexico over the same period. Meanwhile, shipments in Colombia are expected to rise from 3.380mn to 5.692mn and volumes in Brazil will rise from 16.272mn to 62.184mn. Although the kind of entry-level devices most likely to be used to access third-party content platforms will account for less than 25% of all active devices by 2018, this still represents a huge opportunity for Mobile Streams and further diminishes the influence of mobile network operators in the VAS space.

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