Editor’s Note: Welcome to our weekly feature, Analyst Angle. We’ve collected a group of the industry’s leading analysts to give their outlook on the hot topics in the wireless industry.
Mobile broadband is still a growing market in Brazil, led by Vivo with its wide HSPA+ coverage (84.8% of the population) for modem use and on the handset side, by TIM’s aggressive pay-per-day-used offers, helping the carrier establish its leadership among prepaid users, which represent more than 80% of Brazil’s mobile customer base.
Despite exponential growth in customers and traffic over the last three years, which has put a great strain on mobile networks, and the competitive opportunities presented by having complementary Wi-Fi service, there has so far been little investment in Wi-Fi offloading by the Brazilian mobile industry.
With the recent sanctions by regulators due to the low quality of mobile services, as well as the peak traffic levels expected during the 2013 FIFA Confederations Cup, the 2014 FIFA World Cup and the 2016 Olympic Games—all to be held in Brazil—carriers are faced with an urgent need to develop means to offload data traffic from their networks, which uses many times more bandwidth than voice traffic.
So far, carriers have tended to focus offloading efforts on data-exclusive HSPA+ and LTE networks (the latter of which has yet to be implemented), even though these technologies will likely remain inaccessible to most users because of the high price of devices and despite Wi-Fi being cheaper to implement and much more widespread—including simpler webphones as well as high-end smartphones, tablets and laptops. Over the last year, however, the competitive environment for Wi-Fi has begun to change with several diverse services using different strategies.
Cable provider NET was the first to offer free outdoor Wi-Fi to its fixed broadband subscribers in mid-2011, making use of its already existing infrastructure in São Paulo and Rio de Janeiro in a customer retention strategy. What was initially an experimental project is now being expanded to its sister-companies, Embratel and Claro, especially as the latter seeks to offload data traffic from its mobile network after heavily promoting 3G services.
Telecom Italia’s TIM, the carrier most affected by Anatel’s sanctions that suspended mobile services sales in July, also announced it would be launching a Wi-Fi network. In line with its strategy to attract low income subscribers, TIM made the announcement in the Rocinha slum in Rio de Janeiro, where the company’s first hotspots were implemented. TIM hopes to reach 10,000 hotspots by 2013, and it is promoting its Wi-Fi services among corporate clients and shopkeepers who wish to attract more customers.
This was originally the focus of Brazil’s largest pay-as-you-go hotspot provider, Vex, acquired by Oi in the second half of 2011. The company maintains partnerships with the likes of McDonald’s and Starbucks, and now offers free Wi-Fi access to Oi’s high-value, fixed and mobile broadband subscribers. Despite being Brazil’s largest telcom, Oi is a distant fourth place in the country’s mobile service market. With the end of a lengthy merger process which stalled Oi’s growth in recent years, the acquisition of Vex emerges as an important investment as the carrier looks to regain its position in the mobile market.
Operators are now looking for new opportunities to generate revenue in Wi-Fi. on one side, there are value-added services for corporate clients such as network management and advertising, while mobile network efficiency improvements emerge on the other side, with the possibility of improving user experience through indoor voice traffic offloading, and integrating mobile and Wi-Fi data networks to allow for greater speeds.
Georgia Jordan is research analyst for Latin America at Frost & Sullivan. She covers information and communication technology markets.