re: Wireless in Latin America (Latin Business Chronicle)
Who's being quoted:
- David Kerr, VP of the Strategy Analytics Global Wireless Practice
- Marcus Arvellos, Strategis senior analyst of Latin America wireless research
- Eduardo Conrado, Motorola's Senior director for ops and marketing for LA
* Strategis Group and Strategy Analytics [say], wireless telecommunications subscribers in Latin America were expected to reach more than 86 million in 2001, representing double-digit growth over 2000, and the trend is expected to continue in 2002, helped by SMS and data.
* Arvellos predicts TDMA will still be the largest technology in Latin America in 2007.
* Arvellos estimates Latin America will go from a penetration rate of 11.6 percent in 2000 to 33.8 percent in 2007.
Some Latin America subscriber forecasts (in millions):
Note: CDG reported 19,900,000 CDMA subs end of 2001
EMC reported 3,500,000 GSM subs end of 2001
Strategy Strategis
Analytics
2001 subs 86+ million 86+ million
2002 subs 101 million 108.3 million
2002 CDMA 38.7 million
2002 1xRTT 0.6 million
2004 1xEV .8 million
2004 WCDMA 1.3 million
2005 subs 150 million 161.4 million
2006 subs 164 million
2007 subs 195.0 million
2007 CDMA 53.7 million
2007 GSM/GPRS 29.3 million
2007 1xRTT 6.2 million
2007 WCDMA 10.8 million
EMC's GSM/GPRS Forecast for Latin America (millions):
2001 2002 2003 2004 2005 2006
3.5 8.1 13.9 20.0 25.1 29.3
>> Latin America: Wireless Growth
Special Report
Chronicle Staff
Latin Business Chronicle
December 17, 2001
latinbusinesschronicle.com
Despite the gloom and doom of the global telecom sector, Latin America's wireless sector ended 2001 with double-digit growth. The trend is expected to continue in 2002, helped by SMS and data.
According to new data from two separate research firms, The Strategis Group and Strategy Analytics, the number of wireless telecommunications subscribers in Latin America was expected to reach more than 86 million in 2001, representing double-digit growth over 2000.
"Latin America showed remarkable resilience in 2001 given the global turmoil," says David Kerr, Vice President of the Global Wireless Practice at Strategy Analytics.
While the 33 percent growth in 2001 was lower than prior years' triple-digit growth, it came amidst a major economic crisis in Argentina and slowdowns in Brazil and Mexico, he says.
Perhaps just as significant: The Latin American growth rate is more than double the global average, according to Kerr.
"It was a good year," says Eduardo Conrado, senior director for operations and marketing for Latin America at Motorola's Global Telecoms Solutions Sector. "Carriers showed a lot of interest in GPRS and 1x."
GPRS (General Packet Radio Service) and 1x are new technologies that enable higher transfer speeds of data on wireless phones and are expected to help boost the demand for the wireless Internet in Latin America.
The relatively strong performance in 2001 was partly due to Mexico not being as negatively affected as Argentina and Brazil in terms of economic slowdowns.
In 2002, the number of wireless subscribers should grow further. Strategy Analytics forecasts that Latin America will have a total of 101 million subscribers, while Strategis is even more optimistic, predicting 108.3 million. Either figure represents a net increase of more than 15 million subscribers.
"2002 will be a transition year," Kerr says, pointing to the introduction of some location-based services, trial content to cellular phones and audio and video clips.
Much of those services, in turn, will come as a result of scheduled roll-outs of GPRS and 1x throughout the region.
However, not everyone expects 2002 will bring strong growth. Motorola expects flat growth compared to 2001 as a result of the economic slowdown.
"Most carriers in Latin America are international and are not insulated from what happens in Europe, Asia or the United States," says Conrado.
Roberto Peón, chief marketing officer of BellSouth International, believes 2002 will be the year of consolidation in Latin America, with carriers concentrating on the bottom line rather than growing the number of customers.
The growth in the wireless telecom sector will be partly driven by increased demand for data, analysts and industry officials say.
Short Messaging Service (SMS), which has had a huge success in Europe and some parts of Asia, is expected to start growing fast in Latin America as well.
"SMS will more and more play an important role," predicts Conrado.
However, SMS faces challenges that include lack of inter-operability between carriers and a still relatively small base of SMS-enabled wireless phones, Peón says.
But Latin America can also benefit from the relatively late (compared to Europe) launch of SMS since more advanced messaging technologies are now being released, some industry officials say.
"When they [carriers] introduce in Latin America, it will be instant messaging and more advanced SMS," Conrado says.
And when consumers get used to SMS and messaging, they will be more inclined to use other data services, he predicts.
Kerr agrees. "You'll very rapidly see migration from SMS to true Internet access with significant growth."
That growth will partly be driven by the fact that most Latin Americans cannot afford PC's and thus will only be able to access the Internet through wireless phones, which are more of a mass-market product within range of all socio-economic classes.
"Latin America's trajectory is more like that of Scandinavian markets and indeed some Southern European markets where wireless is the default access to the Internet," says Kerr.
However, Peón believes Latin America will differ from Europe in one key aspect: Voice-activated data will be key.
"It's culturally different from other places," he says."People love to talk."
New Technology - GPRS/1xRTT/1xEV/WCDMA
Another key driver for the growth: the introduction of the new technologies that can transfer data at higher speeds. In addition to GPRS and 1x (which promise maximum transfer speeds ranging from 114 kbps to 144 kbps), they include more advanced technologies such as 1xEV and W-CDMA (which promise maximum transfer speeds ranging from 2 mbps to 5 mbps).
"With GPRS and 1x being introduced, you'll see an uptake in data," says Conrado.
1x will grow from 555,200 subscribers next year to 6.2 million by 2007, according to Marcus Arvellos, a senior analyst of Latin America wireless research at The Strategis Group. He couldn't provide exact GPRS forecasts, but the category GSM/GPRS should grow from 1.5 million in 2000 to 29.3 million in 2007, he predicts.
Among the most recent 1x contracts: Motorola announced in July that it had been awarded a $84 million deal to provide 1x infrastructure to Brazilian carrier Telesp Celular and a separate, $64 million contract to provide Global Telecom (also in Brazil) with 1x infrastructure.
The more advanced technologies, 1xEV and W-CDMA (also known as UMTS), should be launched in 2004, and both see strong growth the following three years, according to Arvellos.
1xEV will grow from 770,700 in 2004 to 5.4 million in 2007, while rival W-CDMA should grow from 1.3 million in 2004 to 10.8 million in 2007, he predicts.
The launch of 1xEV and W-CDMA in 2004 results in Latin America lagging Europe and Japan in terms of advanced 3G technologies. Both the latter regions have starting to implement or test 3G services in 2001.
"It's perfect timing," says Conrado. "While Europe develops UMTS, Latin American can leverage some applications in GPRS before going to UMTS."
Latin American carriers have traditionally been using TDMA, but the new technologies providing higher data transfer speeds either use CDMA networks or require some GSM/GPRS infrastructure.
At the same time, several Latin American carriers owned by European telecoms have been under pressure to migrate to GSM/GPRS (the only technology in Europe), allowing the parent company cost savings when purchasing equipment, although some - like Telesp Celular (owned by Portugal Telecom) - have chosen CDMA.
As a result, GSM and CDMA are expected to grow significantly the next couple of years. The number of CDMA subscribers will likely go from 17.9 million subscribers in 2000 to 38.7 million in 2002 and 53.7 million in 2007, according to Arvellos. After only recently being launched in Latin America, GSM is expected to also grow fast during the same period.
Yet, TDMA will still be the largest technology in Latin America in 2007, Arvellos predicts. Many carriers are still reluctant to invest significant sums to migrate from TDMA - especially at a time of economic uncertainty in both Latin America and globally.
Brazil & Mexico
Not surprisingly, Brazil is expected to be the leading driver in terms of data growth in Latin America.
"That will be a market that drives data in the region," says Conrado. "You have very successful and innovative operators in Brazil that are launching 1x and next year GPRS, so you will see some very interesting competition."
In terms of demographic segments, both Kerr and Conrado expect the youth market to be driving some growth. But Kerr says the business market will likely be the one boosting income for the carriers, attracted by unified messaging, e-mail, wireless Intranet and PIM solutions on wireless phones.
"Profits will be driven by the enterprise space," he says.
Peón points out that unlike Europe, the youth market in Latin America belongs to the poorer segments, with less purchasing power. This, in turn, limits how much they can use on wireless data, he warns.
Beyond 2002, both Strategis and Strategy Analytics are forecasting sustained double-digit growth. In 2005, Strategy forecasts, there will be 150 million subscribers, while Strategis predicts the region will see 161.4 million.
In 2006 the region should boast a subscriber base of 164 million, Strategy forecasts. The following year, there will likely be 195 million, according to estimates by Strategis.
"We expect wireless to become indispensable tools, as it has become in many European markets," Kerr says.
Brazil, already the top telecom market, will see the strongest growth in terms of new subscribers, accounting for nearly half of the growth in the 2001-07 period, while Mexico will account for another third, according to Arvellos. Argentina, Venezuela, Chile, Colombia and Peru will account for much of the remainder, he forecasts.
"Brazil and Mexico will drive growth in Latin America," says Conrado.
Competition in Mexico is expected to heat up after both Spain-based Telefónica (the largest carrier in Latin America) and UK-based Vodafone (the world's largest wireless carrier) acquired stakes in local telecoms Optel and Iusacell, respectively. The two now pose a major challenge to the reign of Telmex, the longtime king.
"Pyramid expects Telefónica to continue acquiring properties and become a leading telecom provider in Mexico mirroring its success across Latin America, Europe and Africa," Pyramid Research said in a recent report on the communications market in Mexico.
Chile
But Chile is also expected to show a strong performance. While relatively small, Chile can boast the highest penetration rate in Latin America - a rank the country will continue to have through 2007, Arvellos predicts. The country will also show the strongest increase in penetration rates, from more than 30 percent in 2001 to nearly 70 percent in 2007.
"Chile is small market, but has a very strong economy and strong software base," says Conrado.
Venezuela will also continue to hold its rank as the second-highest market in penetration during the 2001-2007 period, while also nearly doubling the rate, according to forecasts from Arvellos.
While political and economical uncertainty will be a factor, the country does boast several strong and sophisticated carriers as well as one of the region's highest rates of minutes per user, Conrado says.
All in all, Latin America will go from a penetration rate of 11.6 percent in 2000 to 33.8 percent in 2007, Arvellos estimates.
"Despite continuing global turmoil and region-specific issues such as Argentina, we remain quite optimistic for the next five years for cellular in the region," says Kerr. <<
- Eric - |
