The nearing maturity of mobile voice services in most Latin American countries and the reduction on mobile termination rates set by regulators are leading to three main trends in the region: the launch of unlimited plans; the search for new revenue streams; and the commercial launch of multiple-play offerings.
Competition is likely to increase in all markets, not only due to the coverage overlap of large regional telecom groups with multiple-play offerings, but also due to the launch of new entrants and mobile virtual network operators, which are attracted with the favorable macroeconomic outlook in Latin America, and due to the influence of regulatory watchdogs, especially in Colombia, Mexico and Peru, which are the most concentrated markets.
Some examples of regulatory remedies expected to be implemented include mobile number portability in Argentina and Chile during 2012, gradual MTR cuts and regulatory asymmetries in Brazil, Colombia, Mexico and other countries.
The launch of unlimited plans
Even with some growth potential ahead in the majority of Latin American countries, the traditional voice market is likely to be threatened over the next years. This includes push-to-talk over cellular networks, as well as VoIP applications with connectivity provided by data plans. These new solutions, which work over 3G and 4G networks, have a higher quality of service than previous solutions and are likely to become a substitute in a larger scale for mobile telephony.
Instant messaging, social networks and e-mail incorporated into mobile devices are also a threat to text messaging, as they are an alternative for high prices charged.
Considering these factors, unlimited voice and SMS plans, which are already offered by most mobile operators (either through on-net plans or PTT), are likely to be intensify in 2012.
The increasing competition is also an important driver, as there are new entrants expected for 2012 as Nextel in Brazil, Chile, and Mexico; VTR in Chile; UNE in Colombia; and Alestra in Mexico.
Although there are currently only a few MVNOs in commercial operations, and most of them are owned by fixed operators, it is expected that new MVNO launches happen in Latin America due to a favorable scenario for mobile services and interest of different companies in this business. However, challenges related to the current market stage, high tax burden and interconnection rates and negotiation with mobile network operators need to be overcome by MVNO candidates.
The search for new revenue streams
The search for new revenue streams is an effort of operators to increase the total market with new service offerings (Internet access, machine-to-machine, mobile payment, IT services, etc.). Considering these growth opportunities, revenues are expected to increase at a compound annual growth rate of 7.4% from 2010 to 2016, to reach $106.56 billion in 2016, according to the Frost & Sullivan study “Latin America Mobile Services Markets Outlook II, 2010.”
Among the most promising mobile services in the future, Internet access has a prominent position. Smart devices and data cards proliferation, along with affordable data plans for prepaid and postpaid users (sometimes induced by government policies, such as national broadband plans) and a wider coverage of HSPA, HSPA+ and LTE networks, are likely to drive the growth of Internet access in 2012, serving sometimes as a substitute for fixed broadband.
M2M services also expect to grow significantly in 2012, with opportunities in different verticals such as healthcare, electricity distribution, banking and vehicle tracking. This last vertical represent an outstanding opportunity in Brazil, considering that it was determined that car manufacturers must implement anti-theft localization module equipment in every new car produced.
Mobile payment is another focus of mobile operators in the region. Examples are the partnership of Telefónica S.A. and MasterCard in 12 Latin American countries and TNL PSC S.A. (Oi), Banco do Brasil and Cielo in Brazil. Other implementations expect to happen during 2012, using several solutions, such as SMS-based transactional payments, direct billing for postpaid users, online payments and near field communication.
For the enterprise segment, IT services are also a trend, especially cloud computing, enterprise mobility solutions and mobile device management, which are likely to be adopted by corporations and small and medium enterprises.
Commercial launch of multiple-play offerings
Quadruple play is likely to appear in the Latin American countries, when fixed and mobile operators integrate their commercial offerings. An example of quadruple play is from Movistar in Venezuela, which offers fixed and mobile telephony, mobile broadband, and pay TV using direct-to-home technology. Another example of a multiple-play package is with América Móvil in Brazil called “Combo Multi.”
Several multiple-play offerings expect to occur during 2012, in some cases including Internet access through Wi-Fi hotspots. The deployment of Wi-Fi hotspots denotes a concern of mobile operators to offload data traffic from 3G networks. In Brazil, this strategy is being implemented by TIM, Oi and América Móvil, while Telefónica is currently focused on expanding its 3G network coverage.
In addition to having a role as the data traffic offload, Wi-Fi hotspots may help mobile operators deal with over-the-top content, and also enter this market by providing multiplatform offerings of pay TV services and video on demand.
By Renato Pasquini, article published in RCR Wireless News on January 16, 2012 (http://www.rcrwireless.com/article/20120116/opinion/2012-predictions-latin-america-set-for-shakeup-in-plans-revenue-streams-and-bundled-offers/)
The implementation of a new regulatory framework for the telecommunications industry in 1997 and the subsequent privatization of Telebrás (a holding of state-owned telecom companies) brought unquestionable benefits to Brazilian society. It began a cycle of investment in telecommunications infrastructure, fixed and mobile, which induced an increase of productivity in all sectors of the economy. As a result of investments, the number of connections reached 274.1 million in 2010, according to the study Brazil Total Telecommunications Services Markets, 2011 of Frost & Sullivan.
In order to gain scale and provide different services, we have seen between July 1998 and August 2011 the consolidation of dozens of providers of telecommunications services, resulting in market dominance articulated by six major groups: America Móvil (Embratel, Claro and Net), Telefónica, Oi, TIM, GVT and Sky.
Currently, these six groups, as a result of the regulation, require multiple licenses in order to provide each service offering; in addition, they are required to maintain different company registers for fiscal purposes, often incurring tax and operational inefficiencies, as well as keeping partnerships with other companies due to foreign ownership restrictions.
In order to step into service bundles for the residential market and complete solutions for the corporate market, simple tasks such as the unification of an invoice for all services to the consumer, become complex.
With the approval of a new legislation for pay TV services, eliminating some regulatory hurdles, and the implementation of a plan for the expansion of broadband, Brazil takes important steps for the beginning of a new wave of investment by service providers, which is likely to accelerate the phenomenon of convergence of services and increase the penetration of telecommunications services in homes and businesses in Brazil.
However, the challenges to service providers are relevant.
First, it will be necessary to update IT systems, including OSS / BSS, to support multi-service strategies. The importance of IT infrastructure to enable the offerings will grow. And the best provider that can customize services to the needs of each consumer will have competitive advantages.
Second, the providers will be challenged to develop pricing models and bundling strategies that are profitable over time. This especially applies to the pricing of broadband plans, especially those of new generation (FTTx, HFC, LTE), given that all the services are being deployed over IP.
The protection of the traditional business of the company should be accompanied by an appropriate pricing of broadband.
Going forward, in the case of mergers and acquisitions, the challenge will be to manage the clash of cultures and the differences in the incentives structure between firms. Vivo and Telefónica are already facing this challenge, and Embratel, Net and Claro will have to face it, should they be integrated.
Another relevant point is the redesign of customer-facing processes, including billing, installation and customer support, to support bundled offerings. If the offer is integrated, the customer support must also be. The management of quality indicators will also be important during the integration, so as not to affect the reputation of providers.
Finally, for companies that do not offer all services such as GVT, TIM and Sky, there will be the challenge of launching a service, or to complete the offering of multiple services through partnerships or resale of services. While companies are somewhat resistant to partnerships, due to the limited offering flexibility and interests of each party involved, the possibility of resale of fixed and mobile services (MVNO and unbundling) opens, in order to ensure competition in packages.
It is expected that with convergence the Brazilians can have access to more services with higher quality and lower prices, and that providers can obtain return on investment, creating a virtuous circle. The Government has an important role in mediating this relationship, ensuring stability for investment and stimulating consumption. Thus telecommunications services, now with broadband, may continue to be a vector of productivity increase for the country.
By Renato Pasquini, article published in TeleSemana on September 11, 2011 (http://www.telesemana.com/futurecom2011/2011/09/11/desafios-para-a-convergencia-de-servicos-de-telecomunicacoes-no-brasil/)
In recent years there has been a growing trend of offering integrated services to consumers, through the merger of fixed networks (PSTN, DSL) and mobile networks (2G, 3G, Wi-Fi, WiMax), what we commonly call the fixed-mobile convergence (FMC). This term also includes convergence of devices and services, in order to present a universal wireless solution with seamless transition between networks.
The FMC has a value proposition for both operators as customers. Operators seek to create new revenue opportunities, reduce customer churn rate and reduce costs through economies of scope and better use of networks. Customers want to satisfy their communication needs with connection at any time, place, network, and with any device, at best price and simplicity ("one stop shop").
However, operators need to ensure that they sell a service, not a technology. Only then there will be of interest to the mass market, stressing simplicity and convenience, rather than simply technology.
The challenge is to find solutions for interoperability, roaming connectivity, joint billing for services, security and quality of service, considering that there are lots of networks and devices in the market today.
Convergence in Latin America
While trendsetter operators have already deployed fixed-mobile convergence services in developed markets such as NTTDoCoMo in Japan, KT in Korea, BT in the UK and PCCW in Hong Kong, the lack of availability of infrastructure and regulatory restraints have delayed the deployment these services in Latin America.
However, there are some initiatives of converged services in the region such as Brazil, Chile and Mexico.
Oi in Brazil and Telmex in Mexico have integrated offerings of mobile and fixed services, including broadband. But they face regulatory restrictions to offer IPTV, having to supplement the bundle with satellite TV technology (DTH).
Other examples of fixed-mobile convergence are those of TIM Brasil and Movistar Chile, which offer Wi-Fi internet services in hotspots and indoor locations, along with its 3G broadband offering, in an initiative to try to better manage 3G traffic and encourage the use of Wi-Fi whenever possible to reduce network costs and investments.
Considering the experience of the operators we can see that the main market drivers for fixed-mobile convergence in Latin America are: 1) Rapidly growing economies throughout the region with improving social conditions of the middle class; 2) Exponential growth of broadband and mobile telephony subscribers in the region; 3) Main service providers in the region recognize convergence as a key growth strategy; 4) Growing demand for mobile services “always on”; 5) Need for simple and cost-efficient business solutions.
However, there are some restraints for a larger deployment of converged services: 1) restrictive regulatory framework in the countries of Latin America, especially Brazil, Mexico and Argentina for IPTV and also regulation by technology and not by service; 2) Fixed networks remain existing as independent structures from mobile networks in several Latin American markets; 3) Perception of complexity in the service; 4) Lack of dual-mode devices and their high cost; 5) Concern with quality of service.
It is expected that new initiatives are undertaken along the integration process of fixed and mobile operations of América Móvil and Telefónica Group in the countries of the region, as well as alternative operators, such as GVT in Brazil, Telsur in Chile and Maxcom in Mexico, just to name a few.
There is a strong trend for multiple play offerings in Latin America, and the competition will focus on the best deals around "one stop shop" for each customer profile. This trend will be accelerated to the extent that regulatory restrictions in some countries are eliminated, and the solutions gain a commercial scale.
By Renato Pasquini, article published in Chilean magazine GERENCIA on April 2011 (http://www.emb.cl/gerencia)
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