2007 Latin America - Telecoms, Mobile and Broadband in Mercosur, Guyana, Suriname, Venezuela

This market report covers seven economies in Eastern South America, including the Mercosur block on the South Eastern coast, and Venezuela, and Guyana, and Suriname, on the North Eastern coast. The Southern Cone Common Market (Mercado Común del Sur –Mercosur) was established in March 1991 by Argentina, Brazil, Paraguay, and Uruguay to promote free trade and movement of goods and peoples, skills and money, among South American countries. This report takes an overall look at the seven telecoms markets, and includes scenario forecasts for Argentina, Brazil, and Venezuela.

Argentina: Argentina has one of the most solid state-of-the-art telecom infrastructures in South America. Fixed-line teledensity is around 22%, similar to Brazil and Chile. Like elsewhere in Latin America, the shift is away from traditional telephony and towards mobility. While fixed lines stagnate, mobile telephony is booming, reaching a penetration of over 82% – a figure that is well above the Latin American average, trailing only Chile and a few Caribbean islands. All telephony services are open to competition, requiring a single licence for any type of service. The country’s incumbents Telefónica de Argentina and Telecom Argentina still dominate the country’s fixed network, but long distance telephony is highly competitive. Three mobile operators, Movistar, CTI Móvil, and Telecom Personal, run a close competition for mobile market share. All three are planning network upgrades in 2007 to prepare for the launch of UMTS 3G technology. Argentina’s Internet market is the third largest in Latin America, and penetration is among the highest in the region. In the broadband market, ADSL has consolidated its leadership, overtaking cable modem, which used to be the main means of broadband access. The government is drafting a new telecoms law to facilitate media convergence, the main issue being whether telcos should be allowed to offer pay TV services. Grupo Clarín has applied to merge the country’s two leading cable TV operators, having become the controlling shareholder of both in September 2006. The adoption of digital terrestrial TV has been delayed, among disagreements on the standard to be adopted.

Brazil: Since mid-2003, the Brazilian telecom market has enjoyed outstanding growth, led by the mobile and broadband markets. On the other hand, local fixed-line telephony has been shrinking at an average rate of 2.8% a year from 2004 to 2006, losing customers to mobile telephony, while higher income households disconnect narrowband lines in favour of broadband, and VoIP services grow ever more popular. At around 19%, Brazil’s fixed-line teledensity is extremely low compared with North America and Europe, but is about average for Latin America. Mobile penetration is also about average for the region, trailing Chile, Argentina, and several other countries, but in terms of subscriber numbers, Brazil holds more than one third of all the mobile users in Latin America. GSM is Brazil’s preferred technology, and is gradually taking over the mobile market. In terms of Internet user numbers, Brazil is also the undisputed leader in Latin America, but in terms of Internet user penetration, Brazil rates only slightly higher than the Latin American average, and lags well behind Chile. ADSL is the preferred broadband technology, although 2006 witnessed an unexpected increase in the proportion of cable modem versus ADSL users. Since the second half of 2006, Brazil has become a battleground over WiMAX licences and triple play regulations, the issue being whether the country’s fixed-line incumbents should enter these markets, or whether their participation would stifle competition. Meanwhile, the government is preparing to introduce digital terrestrial TV in December 2007, having selected the Japanese standard. New developments in the regulatory scenario include the approval of number portability, the introduction per-minute billing, the adoption of digital terrestrial TV, the preparations for 3G licensing, and the planned new laws on media convergence, among others.

Guyana: Compared with the rest of Latin America, Guyana’s fixed line teledensity and mobile penetration are about 15% below the regional average. They are, however, considerably higher than would be expected considering that the country’s GDP per capita is about the fourth lowest in the region. Still, there are long waiting lists for telecom services and many rural areas have no fixed-line or mobile coverage. Despite numerous attempts at liberalisation, Guyana Telephone and Telegraph (GT&T), controlled by Atlantic Tele-Network (ATN), is the country’s only fixed-line operator, and dominates the mobile market. A competing mobile player, Cel*Star, launched services in November 2004. In an unexpected turn of events, the Caribbean mobile giant Digicel announced, in November 2006, that it had acquired Cel*Star’s mobile operation. Guyana’s ISP market has been open to competition from the start, and the country has a surprisingly large number of Internet users. A few ISPs and most Internet cafés offer VoIP services – a controversial practice, which has led to complaints by GT&T, since Internet telephony is a grey area in Guyana.

Paraguay: With the lowest fixed-line teledensity and also the lowest Internet user penetration in South America, Paraguay has more than eight mobile phones for every fixed line in service. The state-owned incumbent, Copaco, has a monopoly over the fixed-line market, and is known as being inefficient and overstaffed. This has been a bonanza for the four private operators that compete in the mobile market. Mobile penetration is about average for Latin America – which is an incredible achievement, considering that Paraguay’s GDP per capita is roughly 72% lower than the regional average. All four mobile operators provide GSM/GPRS services. The government is working on plans to privatise and liberalise the telecom market, which has considerable expansion potential, judging by Paraguay’s GDP, which although low, warrants greater fixed-line and Internet development.

Suriname: Despite economic and legislative problems, Suriname’s telecom infrastructure is reasonable compared with the rest of Latin America, and teledensity is slightly higher than average for the region. Mobile penetration, about 25% above the Latin American average, is remarkably high considering that Suriname’s GDP per capita is less than half compared with the region as a whole. Internet user penetration, on the other hand, is far lower than average. State-owned Telesur has been the exclusive provider of fixed-line and mobile telecom services, but is gearing up for competition, as the government granted two new telecom services licences to Caribbean telcos Digicel and Intelsur in August 2006.

Uruguay: Uruguay is one of the few Latin American countries where the domestic long distance and local fixed-line markets are neither privatised nor liberalised. Other segments of the telecom market have been opened to competition, including international long-distance telephony, mobile telephony, and the Internet. Yet, Uruguay has the highest fixed-line teledensity in South and Central America, and Antel, the state-owned incumbent, has been unusually efficient for a government monopoly. The country is also one of the regional leaders in other key indicators, such as Internet penetration and adult literacy. GDP per capita is high compared with the rest of the region. Competition in mobile telephony began in 2004, leading to an explosion in the number of mobile subscribers, with annual growth rates of around 95%.

Venezuela: The telecom sector is the second-most important business in Venezuela after the oil industry. With the fourth largest oil reserves in the world, Venezuela’s GDP per capita is higher than the Latin American average, although its dependence on fluctuating oil prices makes it vulnerable to boom and bust cycles. Fixed-line teledensity is low compared with other Latin American countries, but is growing. Mobile telephony, on the other hand, is well above the regional average, and mobile phones outnumber fixed lines in service by more than four to one. The broadband market is in its infancy and a promising arena for investors. Triple player Intercable is Venezuela’s number two broadband provider and cable TV market leader. Besides Intercable, NetUno also offers triple play service, combining cable TV, broadband, and telephony. A major development in early 2007 was the re-nationalisation of telecom incumbent CANTV. The announcement, in January 2007, halted the planned sale of CANTV to América Móvil and Telmex. The Venezuelan government agreed to pay Verizon US$572 million for its 28.5% stake in the operator, and launched tender offers in Venezuela and the USA for the remaining shares.

For those needing high level strategic information and objective analysis on the telecom markets in South America, this 230+ page report is essential reading and gives further information on:

• Regulatory developments;
• Fixed-line developments, including the adoption of alternative technologies such as VoIP;
• Mobile telephony developments, and the adoption of mobile data services;
• Broadband developments and the incursion into wireless technologies such as WiMAX;
• Triple play development, leap-frogging into a new technology in markets with low teledensity;
• Scenario forecasts for the fixed line, mobile, and broadband markets in Argentina, Brazil, and Venezuela.

Data in this report is the latest available at the time of preparation and may not be for the current year