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Latin America Wireless: Central American Boom

www.latinbusinesschronicle.com

Central America’s wireless sector is booming. Four Central American countries are among the top ten growing markets in Latin America in percentage terms, while two are among those that are growing most in real terms.
Last year Central America reached a total of 33.0 million wireless subscriptions, an increase of 27.8 percent. By comparison, Latin America as a whole grew by 20.1 percent and worldwide growth was 18.8 percent, according to a Latin Business Chronicle analysis of new data from the International Telecommunications Union. In real terms, Central America added 7.2 million new wireless subscriptions.
And the potential for future growth is strong. Costa Rica, the second-smallest wireless market in Latin America, is expected to see a strong increase in wireless subscriptions as a result of the liberalization of its market next year, which includes the lifting of the monopoly of state-run telecom ICE.
Cable & Wireless Panama, Digicel, Movistar and Tigo have informed Costa Rica’s Superintendence of Telecommunications (SUTEL) of their decision to enter the market, while Claro (the brand owned by Mexico-based America Movil) is also expected to join, according to Signals Telecom Consulting. “These operators will represent significant competition for ICE, mainly in the prepaid market, accelerating the pace of customer acquisition,” Elias Vicente, senior analyst for Signals Telecom Consulting said in a statement. “The low level of mobile market penetration in Costa Rica, and the incipient prepaid service, makes it an interesting target with high potential for rapid growth in line numbers.”
Costa Rica was one of the markets that last year saw the strongest growth in Latin America, boosting wireless subscriptions by 25.1 percent to 1.9 million. That was the tenth-highest growth in the region. Other growth champions include Honduras (up 43.2 percent – the third-highest in Latin America), Nicaragua (43.2 percent) and Guatemala (25.6 percent).
CUBA, BRAZIL GROW MOST
Cuba, the smallest wireless market in Latin America, saw the strongest percentage growth last year – 67.3 percent to 331,700 subscriptions, according to the Latin Business Chronicle analysis.
Measured in real terms, Brazil saw the strongest growth, boosting the number of subscribers by 29.7 million to a total of 150.6 million. Mexico followed, with an addition of 8.7 million to 75.3 million subscribers.
Other growth champions in real terms include Colombia (7.4 million additions), Peru (5.5 million) and Venezuela (3.3 million).
But Central America also did well. Guatemala posted the sixth-highest growth in real terms after adding 3.1 million new wireless subscribers, while Honduras followed with the seventh-highest increase after adding 2.0 million new subscribers.
All in all, Latin America now boasts 459.9 million wireless subscriptions, according to the Latin Business Chronicle analysis. In real terms that represents an increase of 77.1 million new subscribers. That was ten times more than the United States added last year - 7.5 million.
COSTA RICA
Tigo and Digicel are already present in the market, albeit indirectly. Tigo is involved in the pay TV services of AMNET, while Digicel sponsors the national soccer team.
“ICE has made significant progress following the deployment of an exclusive website for its content-based VAS, as well as its announcement of prepaid and 3G services…based on UMTS/HSPA,” Jose Otero, President of Signals Telecom Consulting, said in a statement. “Nevertheless, this state-run operator still needs to implement some significant steps, such as the deployment of an exclusive brand for mobile services.”
Speed in the sale of lines will be the significant differentiating factor for operators entering the market, Vicente adds. “The market will be exposed to a new modality for the sale of lines and terminals, where the time taken for users to obtain a line will be radically shortened. It will therefore be important for ICE to position itself as an agile operator, so as not to be left behind by the competition,” he says.
A recent decision by SUTEL authorizing Amnet to provide broadband and VoIP services opens the door to bundled service offerings, Vicente points out. “If it gains a mobile license, we expect Tigo to unify Amnet services under that brand, launching double, triple and quadruple play services,” he says.
In addition, CATV operators such as CableTica will become assets that will be coveted by other incoming operators, America Movil in particular, predicts Otero.
NICARAGUA
Neighboring Nicaragua, Latin America’s third-smallest wireless market, also is attracting more interest. Digicel and Millicom have shown an interest in entering a market dominated by Claro and Spain-based Movistar.
“The two operators [Claro and Movistar] have focused their strategies on different market segments, generating low growth in terms of the addition of new lines,” Vicente says. “As a result, a lack of aggression can be seen in market tariff offerings. Absence of per-second billing and the restricted offer of bundled services highlight the limited customer retention strategies of these operators.”
Also Cable & Wireless Panama could attempt to enter the Nicaraguan market, Signals predicts. As a result of expected competition, Nicaragua’s wireless market should reach revenues of $2 billion during the 2008-14 period, with penetration hitting close to 100 percent by 2012.
PANAMA
Panama, which has Latin America’s second-highest wireless penetration, is also a market expected to see strong growth.
Commercial launches by Claro and Digicel will increase mobile telephony lines, leading to a Compound Annual Growth Rate (CAGR) of 7.3 percent for the 2008-2014 period, Signals forecasts. All in all, Panama’s wireless market should see accumulated revenues of $6.4 billion during that period, it says.
However, incumbents Cable & Wireless Panama and Movistar have provided fierce competition for the new entrants.
“Offerings deployed by the incoming operators contained no surprises for the market, as the established mobile operators anticipated them by introducing services that might be considered innovative,” Vicente says. “For example, Cable & Wireless Panama’s +Movil introduced per second billing, a service that had been intended to be one of the principal differentiation factors in the offer unveiled by Digicel. Movistar also succeeded in anticipating Claro’s entry with its mass market commercial 3G (UMTS/HSPA) launch, minimizing the potential impact from the launch of the America Movil subsidiary, which without doubt can blame service launch delays for failing to gain a significant share of the market.”
Unlike the situation in other countries, Internet access by means of UMTS/HSPA is the main growth weapon for Claro Panama, more so than voice services, as its low customer numbers ensure better data transmission rates and low network congestion, according to Otero. “This will enable it to reach high-value customers in the short term, to which it will be able to sell additional services once the company improves its network coverage in the country,” he says.

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