Latin Trade Magazine
From January to March, customers who bought a new wireless phone, prepaid plan or service package were entered into a raffle for tickets to a Shakira concert or to an international soccer match at the new National Stadium in
Driving these promotional efforts is the looming arrival of two deep-pocketed multinationals who are
In September of this year, two years after CAFTA was adopted, the last state-run wireless monopoly in
Market observers predict a radical transformation of the industry in this nation of 4.6 million people. Pyramid Research, the Cambridge, Massachusetts-based specialist in the telecommunications industry, estimates that ICE could lose as much as 75 percent of its market share by 2015. An estimated 3 million Costa Ricans currently have cellular service from ICE.
“In soccer terms, this will be like a game between one of the world’s best teams, like
América Móvil has committed to invest $77 million in infrastructure and market development in
But not everyone is convinced that ICE will suffer a dramatic fall from grace. Given its dominant market-share position, some people think ICE will be tough to topple. It also offers fixed-line and Internet services. “
Yet some consumers are eager for options. Service from ICE has its flaws. Every few weeks, coverage will fail. National text messaging sometimes is not available for three-hour stretches.
Costa Ricans will receive the “same high level of service that has resulted in … [millions of] Latin American users,” says Ricardo Taylor, executive director of América Móvil in
ICE might serve a base that is just 1 percent the size of América Móvil’s pan-regional one, yet the company’s president, Eduardo Doryan, says the company is up to the challenge. “Our goal is to maintain as much market share as we can, and we have prepared a strategy that will allow us to do so,” he says. “We have no fear of the competition. The market has space for one and for all. They will have their clients, and we will have ours. … But I can assure [you] that we will defend our revenue with all of our strength, and that we fully expect to remain the primary telecommunications company in
Meanwhile, no one disputes that the companies that manufacture the wireless handsets will be big winners from the heated competition. “We will enter
“We already have a presence there with other Samsung products,” Palacios says.
The competition in
In the 2005-09 period,
Data services are driving top-line growth in
“All the companies indicate that the income from data will become more important,” says Luis Fernando Azevedo, a telecom analyst with Bradesco. “Vivo currently has around 20 percent in data. We think they will surpass 30 percent by 2013. TIM is at around 12 percent and should go to 20 percent over the next three years.”
Although analyst Alex Padellas, who covers telecoms at Banif bank, agrees that demand for data services will grow, he cautions that it is starting from a low base.
“For demand for these things [data, music, videos and Internet] to increase significantly, you need to have a rise in incomes,” he says.
The mobile providers are nonetheless investing in their 3G coverage and capacity, which will support more consumer usage of smartphones, mini-models, notebooks and tablets, Bradesco’s Azevedo says.
He also predicts that prices of voice services will come down. “Minutes will be cheaper. Smartphones will be cheaper and more accessible,” he says. “And as the companies invest, the services will get cheaper. SMS [texting] services are already growing, and you have more applications for that.”
Renata Gammarano, a bank employee in
The iPhone design and iPod music function were determining factors in Gammarano’s December 2009 purchase, but now she uses her smartphone for e-mail and to go online, principally to Facebook. She uses the Skype function and sends a lot of text messages. Gammarano upgraded to the latest model, an iPhone 4, in December. “It really is the best,” she says.
“There are more lines than people because one person has two or three or four lines,” he says. “If he wants to talk to someone with a TIM, he puts a TIM chip in his phone, and TIM to TIM is free. And then if he wants to talk to someone with Vivo, then he’ll put a Vivo chip in because it might have an offer on. That’s why the penetration is so high. Otherwise, it would be 30 to 40 percent.”
He expects the ratio of pre-paid to contracts to remain constant. “If anything, the prepaid numbers will rise a little towards around 85 percent, in my opinion,” he says.
An already-heated market will become more competitive in 2011, says Padellas, who expects Oi to be more aggressive. Another factor: Nextel. “Nextel was in the radio segment, but it will start operating in the 3G wireless segment, and that’s another reason that competition will be fierce,” he says.
However, other experts disagree. “Telefonica’s purchase of Vivo, already the largest operator, will make it the dominating carrier,” says Paola Soriano, an
Telefonica paid Portugual Telecom 7.5 billion euros (U.S. $9.8 billion) last year for the 50 percent stake it didn’t already own in Vivo.
PERU: JOCKEYING FOR POSITION
With mobile phone penetration in Peru expected to reach 100 percent this year, the country’s top wireless operators are spearheading efforts to improve their service and diversify their offerings in order to capture new clients — and retain their current ones.
“Although voice is still our core business, data traffic is growing at an impressive pace,” says Rodrigo Arosemena, commercial director for América Movil, owner of the Claro brand. “At our points of sale, the first thing people ask is, ‘How can I migrate to a smartphone?’ ”
Industry experts say the growing popularity of smartphones among Peruvian mobile users is a confirmation of a trend away from voice-only use of the phones — a trend that can be observed elsewhere in the region and around the world.
With this in mind, Peru’s three wireless operators — Telefónica (with about 60 percent market share), América Móvil (with about 35 percent market share) and Nextel (with about 4 percent market share) — hope to lure customers by offering additional products and services related primarily to data transfer, Internet and e-mail access, instant messaging, ring tones, social websites and other content.
“Complements to voice communication are all the rage,” says Arosemena, who notes that mobile Internet access and the use of
With a more demanding customers base — and a robust economy — competition among
“Mobile density on average surpasses the 100 percent mark, but there still exist regions with less than 70 percent density and some poorer ones with less than 30 percent. We will focus on extending coverage in those areas,” says Alvaro Valdez, director of corporate communications and image at Telefónica del Perú. “In the more developed markets like the main cities, growth will basically be driven by mobile Internet services, smartphones and value-added services.”
Indeed, smartphone sales in
The typical mobile phone user will continue to look more and more like self-proclaimed tech geek Michelle Allemant, a 34-year-old marketing executive who uses her Apple handset mainly for data and less and less for talking.
“I’m on one of the cheapest plans because I barely make calls from my iPhone. I prefer texting my friends or sending them an e-mail — it’s quicker, cheaper and less intrusive,” says Allemant, who has been a Claro subscriber for more than five years. “Most of my friends either have iPhones or BlackBerrys. I can’t imagine anyone carrying anything else.”
At Claro, more than half of all the new phone lines the company sells to its post-pay clients are with smartphones. In an effort to tap into the prepaid customer base — where smartphone use is comparably low — Claro recently launched an offer in which prepaid subscribers can access 10 megabytes for 1 sole a day, or about 27 U.S. cents.
Telefónica, on the other hand, is launching its new Movistar Prime handset during the second trimester of this year. The device, which will use the Android operating system, will be the company’s star product in its self-branded smartphone catalog Alvarez says.
To keep up with consumers’ changing habits and emerging technologies, wireless operators in
Telefónica, for example, is investing more than $1.5 billion in the 2010-2013 period to upgrade its network, which includes, among other things, 1,200 kilometers of fiber-optic lines.
As Claro’s Arosemena points out, “More than just a fad, mobile phones have become a necessity, a working tool at all socioeconomic levels.”
Although América Móvil’s Telcel unit has long dominated the wireless sector in
Televisa announced in April that it planned to buy a 50 percent stake in Iusacell for $1.6 billion. The deal is pending approval by regulators. The expected facedown between Telcel — controlled by Carlos Slim (the world’s richest man) — and Televisa and Iusacell, controlled by moguls Emilio Azcarraga and Ricardo Salinas, respectively, has been dubbed “The Battle of the Titans.”
Telcel boasted a 69.1 percent market share in 2010, according to the Competitive Intelligence Unit, a consultancy in
The rest of
Nextel is a special case. It has the lowest number of subscribers of the four wireless companies but boasts an average revenue per user of 582 pesos, or about $50 a month — more than five times as much as Movistar, which has the lowest average revenue per user.
Nextel’s relatively high-earning users are all on monthly plans. Movistar focuses on low-income consumers; about 90 percent of its customers rely on prepaid cards for their service.
Rosa María Velázquez, a homemaker and part-time bookkeeper, has long been one of Movistar’s prepaid customers. But she feels pressure from the company to upgrade to a contract. “I’m happy with a prepaid system, but the folks from Movistar have been pressing for me to opt for a plan,” Velázquez says. “It would suit them, no doubt, but it won’t necessarily suit me.”
Telcel and Movistar both offer packages in which customers can talk or message with friends on the same mobile network at reduced rates. But there are limitations for the smaller competitor. Telcel has six times as many subscribers, which means Movistar customers have that many fewer potential buddies. “It’s a bit frustrating,” Velázquez says, “but it’s not so much I would want to change operator.”
If she were to change, Velázquez, who lives in Texcoco, near
Others have no choice. “I’m stuck with Telcel,” says Cristina Ortega, a small farmer from Nautla in the state of
In Nautla, Telcel is the only game in town. Indeed, Telcel has the broadest national coverage of any of the providers, followed by Movistar. “There are places all over
Meanwhile, the wireless service providers are looking to a revenue boost from data services with the advent of cheaper smartphones, tablet computers and other devices that can connect to the Internet.
These devices “provide services that only a computer used to have. And most people in
Wing reported from
This article originally appeared in the May/June issue of Latin Trade magazine.
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