Latin America Telecom Industry Projections
Beginning in 2013, many emerging markets — and among these many Latin American markets — will continue to be bright spots in an uncertain and challenging global economic landscape.
Economic growth in emerging markets is expected to be nearly quadruple the economic growth in developed markets. Telecom service revenue in emerging markets will increase five-times faster than in developed markets. At Pyramid, we expect that by 2015 this trend will make mobile service revenue in emerging markets larger than mobile service revenue in developed markets for the first time ever.
Here are Pyramid Research’s key predictions for the future of the telecommunications industry in Latin America:
Machine-to-machine will gain traction in Latin America
With many countries establishing regulatory requirements to include M2M-based tracking services in order to reduce auto theft, M2M in the region is looking increasingly promising. In Brazil, all cars manufactured in the country will include the device, although drivers will not be required to subscribe to the service. Mobile operators will welcome the news: They can keep monetizing their old networks for basic telematics and also sell advanced connections (3G, LTE) to users interested in premium media services.
We do expect more partnerships among global operators and the proliferation of standardized platforms, both with the goal of reducing the friction now present in M2M transactions. In the meantime, both standardized platforms and the size of the revenue opportunity will enable new M2M-only mobile virtual network operators to emerge. Operators should continue to explore the opportunities in M2M roaming agreements, though the ban on permanent M2M roaming in markets such as Brazil should prompt them to adopt other strategies to derive revenue from the M2M market. In the end, friction, fragmentation and overall complexity can stifle or diminish the M2M revenue opportunity for operators, so streamlining M2M service delivery should be a top priority.
We expect strong direct-to-home pay-TV growth in 2013: It is on the path to overtake cable in Latin America
Cable TV still accounts for the bulk of pay-TV subscriptions across Latin America, but it will continue to lose ground to DTH satellite, which we expect to become the most popular pay-TV platform in the region by 2017. DTH’s main drivers have been its ability to reach areas not yet covered by other technologies and to do so at very competitive prices.
For example, pan-American DTH service providers such as Dish and DirecTV have been aggressively promoting entry-level pay-TV packages in the region, thus rapidly gaining market share in countries such as Mexico and Argentina. In Brazil, Mexico and Puerto Rico, DTH subscriptions have already overtaken cable, and we expect Venezuela and Paraguay to follow the same path by 2017.
The flip side of DTH expansion, however, has been extra pressure on average revenue per user levels; the challenge in the next few years will be to migrate those entry-level customers to upper-end accounts, including premium services such as HDTV.
Regulatory restrictions will continue to hamper IPTV growth, but over-the-top video will prosper
The regulatory hurdles that have blocked telcos in countries such as Argentina and Mexico from entering the pay-TV market will remain in place, slowing IPTV growth in the region. The lifting of these regulatory roadblocks does not seem to be a priority in either country, making a change in regulation unlikely in 2013.
In turn, telcos will continue to look for alternative ways to position themselves in the media and multiplay segments, most notably commercial alliances with satellite-DTH providers (e.g., Sky in Mexico and DirecTV in Argentina). OTT video streaming services are providing another entry point into the media market, one made more compelling as broadband penetration continues to increase.
This approach had already been adopted by Argentine incumbents Telefónica and Telecom Argentina in 2011 and more recently, by Mexico’s Telmex with the launch of Clarovideo last November.
Infrastructure sharing will pick up
Under pressure from spectrum shortages and rising network deployment costs, mobile operators are evolving their business models from a focus on coverage as a competitive advantage toward a content-based model, with a migration from a voice-centric model to a data-centric environment. Infrastructure sharing will be encouraged by regulators and followed by mobile network operators seeking to be innovative but in a cost-effective manner. On the regulatory front, infrastructure sharing would increase competition and decrease the need of additional spectrum auctions in the short term.
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.
