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.
Research conducted by Informa Telecoms & Media with operators in 10 Latin American countries shows that most operators did not use the launch of LTE to revamp their pricing strategies, and preferred, instead, to stick with old concepts.
LTE is experiencing strong momentum in Latin America. The region already has 28 live LTE networks as of first week of December, and more networks were made commercially available in 2013 than in 2011 and 2012 combined. Argentina is the only large market across the region that is not building an LTE network. Obviously, LTE is too new to have a meaningful impact in terms of revenue and subscriptions for the operators, however, the technology shows strong growth rates, hardly falling below 100% quarter-over-quarter.
Informa has been tracking all LTE deployments in Latin America and price plans are among the metrics monitored. Informa tracker analyzed 162 plans in 10 countries, differentiating plans for smartphones from plans for tablets and modems. Among the conclusions of this analysis is that most Latin American pricing strategies for LTE lack innovation. In most cases operators chose to use the same pricing structure as the one used for 3G plans.
So, almost all plans are tiered-data plans segmented per-data allowance, though typically LTE plans have bigger data allowances than 3G plans, but using the same structure. There is also a difference between plans for smartphones and tablets/modems with the later having more generous data allowances. In the cases of operators that target the fixed broadband market the allowance can be as high as 100 gigabytes.
As mentioned before, operators chose to differentiate plans mainly by volume of data allowance, with speed as a secondary element, though sometimes not even mentioned in promotional pieces. Nonetheless, among those operators that promote speeds, there is divergence when it comes to downlink speeds. This can vary from two megabits per second to 60 Mbps, always with the disclaimer “up to”, highlighting the “best effort” basis of the technology.
Some examples of carriers attempting to innovate with their LTE pricing strategies are: Movistar Colombia bundling the streaming music service, Napster, to all its “4G” plans; and Personal Paraguay giving 4G users access to a pack containing personal cloud, anti-virus, and six months free access to its “personal video” service.
More evidence of the cautious stance taken by operators is that few have launched prepaid plans, which considerably limits the addressable market in a region that prepaid makes up 80% of subscriptions.
The risk of this lack of innovation is that pricing plans are easily compared across different operators, which, in turn can lead to a price war once the competition gets tougher in the 4G market.
The time has come for operators to innovate on their pricing strategies and should pay particular attention to:
–Digital services, like anti-virus, online video, music streaming, personal cloud and social networks, which can be powerful differentiators for operators. They can bundle these services via partnerships, acquisitions, in-house development or white-label strategies.
–Operators must pay attention to new monetization opportunities, like multi-device and integration of 3G/4G with Wi-Fi.
Arivaldo Lopes is a Principal Analyst with Informa Telecoms & Media for Latin America. He leads Informa’s efforts in understanding the Latin American operators’ strategic options for investment in 4G technologies, as well as providing competitive benchmark analysis, country profiles and analyzing the opportunities for mobile virtual network operators in the region. Lopes joined Informa Telecoms & Media in April 2012. Prior to that he was a senior financial analyst with Google, where he was in charge of capacity planning and forecast for the SMB Customer Services organization. Lopes also has eight years’ experience in the telecoms market, having worked at Vivo as a CRM analyst, and as pricing manager at Brasil Telecom and Oi. Lopes holds a Masters degree in Communications Management at the University of Strathclyde, and has a degree in Economics from the University of Campinas.
