From nbfm on the Qualcomm thread.....
Some hint of the building wireless tornado in Latin America, as exemplified by Mexico:
Mexican Cellular Telephone Boom Brings Quantity Not Quality
Mexico City, Feb. 11 (Bloomberg) -- Alfonso Gomez, who helps produce Mexico's
most popular morning radio news program, boycotted use of cellular phones on the
show for 10 days after endless lost connections and crossed lines drove him to
extremes.
Gomez, who schedules interviews with people such as central bank Governor Guillermo
Ortiz and Finance Minister Jose Angel Gurria for the Monitor news program, asked all
reporters and interviewees to use fixed-line phones until cellular service improved.
``The number of breakdowns was innumerable for a while there,' said Gomez. ``We
couldn't carry on working like that.'
Gomez's frustration, and that of millions of Mexicans who lose their connections daily, is
a sign of Mexico's recent cellular boom that saw the number of lines soar 140 percent in
1999, overloading network capacity. And the flood of new clients shows no hint of
abating, despite consumer dissatisfaction.
Analysts forecast Mexico will have more residential wireless phone lines than wired lines
by 2001, or 25 million to 30 million lines from 7 million lines now.
Companies such as Telefonos de Mexico's cellular unit, Telcel, and Nuevo Grupo
Iusacell SA, which competitors say were caught napping by the explosion, are struggling
to expand their networks. Telcel is investing as much as $100 million a month after
investing $800 million on its network over the past two years.
At stake for the No. 1 and 2 cellular operators, are potential new clients and dissatisfied
customers that could be enticed by wireless newcomers Pegaso PCS SA, part-owned
by Mexican broadcaster Grupo Televisa SA and San Diego-based Leap Wireless
International Inc., and Unefon SA.
Pegaso, which started a year ago this month, ended 1999 with 103,532 customers in
four cities, surpassing its yearend target by as many as 40,000 clients. Fixed-wireless
operator Unefon, 50- percent owned by broadcaster TV Azteca SA, aims for 1.5
million subscribers in five years after starting operations yesterday.
Multiplying
Telcel admits the explosive growth ``has generated some problems in terms of service
quality in some areas of the country,' it said in a statement. The company recently
apologized in national newspaper ads to its users, pledging to address service
complaints.
Telcel added more than 1 million customers in the fourth quarter of 1999, as many as in
the whole of 1998, ending the year with 5.3 million subscribers, the company said. Rival
Iusacell had 1.13 million users by the end of the third quarter, more than double the
amount at the end of September 1998, when it had 627,856 users.
While the number of cellular users multiplied 12 times in the past five years, growth
flourished faster than ever after the government introduced a new calling plan in early
1999 that allowed cellular owners to pass on the cost of the call to dialers. The billing
system, known as caller-party-pays, came later to Mexico than to countries like Brazil
and Argentina that have seen a cellular boom, analysts said.
``Cellular growth is strong pretty much everywhere, it's just that Mexico was late with
caller party pays,' as the billing system is known, said Matthew Hickman, an analyst at
ABN Amro.
Prepaid airtime cards also made mobile phones more accessible to lower-income
Mexicans. About 70 percent of Telcel's customers form part of the prepaid service, the
company said.
As subscribers and complaints grow, Mexico's government is taking action. Mexico's
consumer watchdog received 2,538 complaints against Telcel and 844 against Iusacell,
controlled by Bell Atlantic Corp., in 1999 including crossed lines, dropped calls,
blocked networks and delays to connect.
The telecommunications regulatory agency this month took to the streets in vans
equipped to make calls to cell phones to check quality. They plan to make 12,000 calls
a month.
Cellular operators may be fined and users compensated if they don't comply with service
parameters, said recently Jorge Nicolin, chairman of the state-run agency, the Federal
Telecommunications Commission. If service standards continue to drop, companies
could be ordered to slow down growth, he said.
Stocks Rally
Analysts and investors, though, aren't concerned by network problems or consumer
complaints.
``Any time anyone is super aggressive on growth that brings the risk that the network
quality falls below the level it should be relative to the consumer,' said Paul Aran, an
analyst at Credit Lyonnais Securities Americas.
Telmex's stock price has multiplied almost threefold in Mexico and the U.S. since
January last year, hitting record highs. Iusacell's shares more than doubled in the same
period. Optimism over the start of Unefon's operations yesterday helped Azteca's stock
post its biggest one-day gain ever. Unefon recently received a buy-out offer from an
international telecommunications company that valued the upstart at $800 million, said
Chief Executive Adrian Steckel.
Smaller rivals, while attracting new subscribers, probably won't steal Telcel or Iusacell
clients unless complaints against them increase further, Aran said. Especially since
companies are stepping up investments and addressing complaints.
The station's ban on cellular calls to its program forced its cellular provider to sit up and
take action, resolving many of the station's problems with service. Gomez is now hoping
more reliable cellular service will help Monitor get more of the stories -- such as its
direct cellular link-up from Pope John Paul's plane when he flew into the capital last year
-- that have built the show's popularity. |
