Latin America’s telecom sector is clearly in need of infrastructure investment. Gartner expects the Latam telecom sector to see double digit growth rates this year in traffic, demand and investments as carriers rush to meet the challenges of data and voice traffic growth, which will intensify during the 2016 Olympics Games and 2014 Fifa World Cup. In addition, governments across the region are focused on increasing mobile and broadband penetration through 4G auctions and other strategies.
But the European crisis could significantly impact carriers’ investments in Latin America, especially since some of them – such as Telecom Italia and Telefónica – have their headquarters there. “Our footprint in Latin America helps us, but we cannot forget the difficult situation in Europe,” said Rafael Arranz, EVP for marketing capacity and IP at Telefónica International Wholesale Services, during a panel at Capacity Latam 2012.
At the event, held March 6, 7 in São Paulo, executives primarily from wholesale companies discussed how to address the region’s growth. The panel’s members were clearly very optimist about the region’s perspectives, but they are aware that challenges are great.
Throughout the Latin America region, national governments unveiled programs to improve penetration of telecom services – mostly focused on mobile and Internet broadband – that will continuously enhance telecom services. Moreover, new technology applications, such as cloud computing, also boost data traffic, requiring a very sophisticated and powerful network.
“The traffic growth is going forward and there’s no expectation of it being reduced. Until now, the demand was supplied by companies like us, but to meet future growth it is necessary to develop and optimize new networks,” noted Hector Alonso, regional president for Latin America at Level 3. Riccardo Delleani, Telecom Italia Sparkle’s CEO, agreed. During the question and answer section, he pointed out that he is not too concerned about capacity at this point, but “we are looking very carefully at what we need to do.”
The regulatory environment does not seem to be a big problem, although executives agreed that it lacks unbundling rules. “The regulatory framework should include unbundling to encourage carriers to share infrastructure,” Elia San Miguel, Gartner’s principal analyst, told RCR Wireless News. “From a competitive point of view, the regulatory environment is a success. Rules are simple and technically are not complicated, but it ought to be a more open rich model,” added Delleani, from Telecom Italia Sparkle.
After big events
One big concern of telecom infrastructure providers is related to what will occur in Brazil when the Fifa World Cup and the Olympic Games are gone. “We cannot let happen in Brazil what has happened in South Africa, where there are huge structures that are not used, and there’s no demand for them. We need to invest very well and focus on its return,” explained Erick Contag, Globenet’s COO.
The difference between Brazil and South Africa, though, relies on the increasing demand for telecommunication services that might absorb the whole infrastructure built to supply the events’ requirements. “We cannot only trust in events’ demands, but we need to create an internal market. Latin America must generate regional content, to keep the access locally, because the return on investments will happen when the internal traffic becomes bigger than the external,” said Genaro Garcia Dominguez, Internexa’s CEO.
Moreover, new kinds of content will require different infrastructure and more capacity. “Look at our children and young people to understand what kind of needs we must supply,” added Contag.
Indeed, communication is changing. Consumers are asking for more ways to communicate, which require an expansion of wireless networks to attend to new voice applications with direct impact on data traffic. “The expansion of data is related to the voice increase” said Diana Daniels, senior VP at Marcatel.