NEW YORK-Latin American countries may offer new opportunities for wireless telecommunications carriers, but they must be prepared to compete against incumbents for purchasing power that is concentrated in the hands of a few.

“A lot of the licenses coming up are for the third or fourth provider, so you are looking at a mass market right from day one,” said Toby Dingemans, senior associate in Booz-Allen & Hamilton’s Communications, Media and Technology Practice, New York.

In many Latin American countries, as much as two-thirds of the population earns an annual income of less than $2,500. “Many of these people don’t have an indoor toilet, and they’re not likely ever to have a cell phone,” Dingemans said April 29 at a Booz-Allen seminar on “The Future of the Latin America Wireless Market.”

This year, Argentina, Chile, Mexico and Venezuela are scheduled to expand their wireless markets from duopolies to markets with three-to-five players. The same kind of expansion should happen at a somewhat later date in Brazil and Columbia. Personal communications services “auctions for other countries are definitely in the pipeline,” Dingemans said.

Using the historical perspective afforded by the wireline telephony industry, Dingemans said: “Latin America isn’t an unlimited market opportunity.

“Three players will tend to capture most of the market growth, provided the third entrant comes in at a point where the market hasn’t yet reached maturity, and it can go for a particular niche.”

He added that there isn’t any wireless marketplace today that has reached total maturity, even in Scandinavia, where 30 percent penetration rates are the highest in the world. “As you get past 10 percent penetration, residential subscribers make up 80 percent of the customer base in Europe and the United States,” Dingemans said. This kind of proportion also is likely to play out in Latin America.

Typically, wireless carriers have entered markets with a focus on business customers, who want high quality network and billing capabilities but also are heavy service users willing to pay high prices. The next stage in market evolution has been to go after private consumers with high net worth. Only after these lucrative segments have been tapped to a considerable degree have wireless providers sought subscriber base additions from poorer segments of the consumer population, who want lower costs, use less air time and are less reliable in terms of loyalty and bill payment.

Wireless challengers entering Latin America will have to leapfrog into the lower-end customer base. To husband their financial resources optimally, Dingemans said new carriers with a niche play strategy need to focus capital expenditures only on as much network buildout as dovetails with their targeted marketing plan.

Conservative use of capital for infrastructure development will leave available necessary money for marketing, customer care, handset subsidies and other necessary ingredients for attracting and keeping credit-worthy individual consumers. This is especially important for late-comers to a market because they tend to spend a greater proportion of their early capital on advertising. Since many parts of Latin American countries lack basic wireline telephony, new wireless carriers also should enter these markets with a solid strategy for deployment of wireless local loop, he said.


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