2007 Latin American Telecommunications Market

This Latin American market report takes an overall look at the various telecoms markets of Latin America. In particular, it covers the regulatory developments and fixed-line segments in each of the following economies: Argentina, Belize, Bolivia, Brazil, Chile, Colombia, Costa Rica, Cuba, the Dominican Republic, Ecuador, El Salvador, Guatemala, Guyana, Haiti, Honduras, Jamaica, Mexico, Nicaragua, Panama, Paraguay, Peru, Puerto Rico, Suriname, Uruguay, Venezuela, and the smaller Caribbean island nations. The region’s major markets include:

Argentina

Argentina has one of the most solid state-of-the-art telecom infrastructures in South America. All telephony services are open to competition, requiring a single licence for any type of service. For 2007, the telecom regulator SeCom intends to focus on the satellite venture ArSat and the development of regulations for digital terrestrial TV. SeCom has acknowledged the need for a new telecom law to resolve the issue of convergence (triple play services), but does not consider it a priority.

Fixed-line teledensity in Argentina is stagnating at around 22%, similar to Brazil and Chile. Like elsewhere in Latin America, the shift is away from traditional telephony towards mobility. The country’s incumbents Telefónica de Argentina and Telecom Argentina still dominate the country’s fixed network, but long distance telephony is highly competitive.

Brazil

As in other Latin American countries, mobile and broadband are the fastest growing telecom sectors in Brazil, while local fixed-line telephony stagnates. New developments in the regulatory scenario include the approval of number portability, the introduction of per-minute billing, the adoption of digital terrestrial TV, the preparations for 3G licensing, and the planned new laws on media convergence, among others.

At around 19%, Brazil’s teledensity is extremely low compared with North America and Europe, but it is about average for Latin America. The country’s fixed-lines in service have 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 Voice over Internet Protocol (VoIP) services grow ever more popular. Four incumbents (Telesp, Telemar, Brasil Telecom, and Embratel) dominate the fixed-line market in their respective regions.

Chile

Thanks to a healthy economy and early market liberalization, Chile’s telecom market is the most mature in Latin America. A high level of development has been achieved through investment, competition, and innovation. Chile is the regional leader in terms of mobile penetration (around 81%), Internet user penetration (around 40%), and broadband penetration (over 6%). Telecoms laws need to be amended, however, in view of technological innovations and the use of multi-service networks. Regulatory issues include number portability, Local Loop Unbundling (LLU), Voice over Internet Protocol (VoIP), WiMAX, tariff deregulation, and convergence. VoIP and Wireless Local Loop (WLL) have been the subject of lengthy legal battles between operators.

Chile boasts a modern fixed-line network, fully digitised since 1993. Yet, mostly due to fixed-mobile substitution, the fixed-line sector remains flat. The local telephony market is served by 12 operating companies, with incumbent Telefónica Chile holding 70% of all lines in service. Cable TV operator and triple player VTR GlobalCom is the number two local telephony provider, with a 12% share. The long-distance sector is one of the most competitive in Latin America, despite ongoing consolidation.

Colombia

While the Colombian market is open to competition, privatisation has been complicated by the structure of the local telephony market, which comprises some 30 publicly owned operating companies as well as several small municipal telecom operators. In April 2006, after years of thwarted privatisation efforts, the government finally sold a controlling stake in the country’s long-distance telephony incumbent, Colombia Telecom (renamed Telefónica Telecom), to Spain’s Telefónica.

Teledensity in Colombia is around 17%, slightly lower than average for Latin America. Most telephone lines are concentrated in the four largest cities, where teledensity tops 30%. But in some parts of the country, teledensity is below 10%. The number of fixed lines in service has been stagnating or even decreasing, primarily due to the shift towards alternative technologies and mobile phones.

Mexico

During 2006, there were a number of positive amendments to Mexico’s telecom regulations and competition laws. However, Mexico will soon be one of only two OECD countries yet to implement local loop unbundling. In addition, the regulator Cofetel needs greater independence and power if it is to properly foster a more competitive market. Basic telephony is still practically a monopoly, with Teléfonos de Mexico (Telmex) holding around 92% of all lines in service. Telmex’s sister company América Móvil dominates the mobile sector through its unit Telcel, which has around 77% of the market.

Mexico’s fixed-line teledensity is around 19%, which is about average for Latin America, but growth in fixed lines has been steadily declining, from 13% in 2000 to around 2% in 2006. Indeed, estimates for 2006 suggest that teledensity decreased for the first time. In addition, there are significant disparities between urban and rural areas, ranging from 42% teledensity in the Federal District to 6% in the state of Chiapas. VoIP is gaining popularity, although Cofetel imposes the same licensing requirements on VoIP providers as on other voice carriers, and has shut down numerous unlicensed VoIP operators.

Peru

The Peruvian telecom market has considerable scope for growth in both the fixed line and the mobile sectors, which are underdeveloped even taking into account the country’s low GDP. Although the telecom market is fully open to competition, it is still heavily dominated by Telefónica del Perú (TdP). Changes to Peruvian telecom law that are in the pipeline include the introduction of number portability and the adoption of a single concession licence. A contract renegotiation agreement between the government and TdP, signed in December 2006, has brought about price cuts for consumers and a sizeable investment commitment from TdP.

While local telephony is dominated by TdP, which owns about 96% of all lines in service, long-distance telephony is highly competitive, stimulated by a multicarrier system. Besides TdP, the main long-distance carriers are Telmex Perú, IDT Perú, Americatel Perú, and Impsat Perú.

Venezuela

Venezuela’s telecom industry is considered one of the fastest growing ones in Latin America. After the oil industry, the telecom sector is the second most important industry in the country. The country’s telecom incumbent CANTV was privatised in December 1991, and the fixed-line market was liberalised in November 2000. But, in January 2007, the Venezuelan government declared that CANTV would be re-nationalised. It agreed to pay Verizon US$572 million for its 28.5% stake in the operator, and said it would launch tender offers in Venezuela and the USA for the remaining shares. One of the main grievances against CANTV was that it had only developed its networks in the more densely populated and affluent northern region, and had failed to provide telecom service to the less profitable south.

Venezuela’s fixed-line teledensity is lower than average for Latin America. CANTV owns most of the national telecom infrastructure, although its share of fixed lines in service has decreased from 100% in 1999, to 79% in 2006. Besides CANTV, there are about 5 local telephony operators and 11 long distance operators. Several new entrants have resorted to WLL technology.