2008 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 countries. The region’s major markets include:

Argentina

Compared with the rest of South America, Argentina’s telecom infrastructure is one of the most advanced. Fixed-line teledensity is over 22% and growing, while in neighbouring Brazil and Chile, teledensity is under 21% and declining. There are, however, marked discrepancies between urban and rural areas, ranging from 40% teledensity in Buenos Aires, to less than 8% in a couple of regions.

VoIP is a growing market in Argentina, and is offered by a large number of companies, including the incumbent telcos. WLL solutions using CDMA 450 are being adopted in a few remote areas. Despite liberalisation, real competition has yet to develop in the local telephony sector, but the long distance market is highly competitive. For the country overview, see chapter 2, page 9.

Brazil

With about one third of the region’s population, Brazil is Latin America’s largest telecoms market. The sector has been fully liberalised since 2006, and there are no restrictions on foreign telecoms capital, except for cable TV. The country is a leading investment destination for international operators and suppliers, given its size and potential to develop into a top world market. Competition is encouraged by the Brazilian government, and will be further stimulated by the introduction of number portability in March 2009.

Three regional incumbents (Telesp, Oi, and Brasil Telecom) dominate 87% of Brazil’s fixed lines in service, but their market share is being slowly eroded. GVT has emerged as one of the most successful fixed-line competitors, using hybrid fixed-line/fixed-wireless technology, and offering VoIP services over one of Latin America’s first Next Generation Networks. An ever-increasing number of companies offer services, though a drive towards consolidation pervades all sectors of the Brazilian telecom market. A merger between regional incumbents Oi and Brasil Telecom has been on the cards for some time. For the country overview, see chapter 5, page 36.

Chile

The Chilean telecom market is one of the most dynamic and promising in Latin America. The fastest growing sectors are mobile telephony and broadband. The fixed-line sector however remains flat, mostly due to fixed-mobile substitution. The local telephony market is served by 13 operating companies, with incumbent Telefónica Chile holding 67% of all lines in service. Cable TV operator and triple player VTR GlobalCom is the number two local telephony provider, with a 16% share. The long-distance sector is one of the most competitive in Latin America, despite ongoing consolidation.

Chile’s telephone system is based on extensive microwave radio relay facilities and fibre optic networks. Telefónica Chile operates the largest fibre optic network in the country, with digital satellite and microwave links. Entel operates a nationwide trunk network using a microwave system and an NGN-IP platform. Telmex Chile has upgraded its fibre optic infrastructure with IP/MPLS and NGN technology. For the country overview, see chapter 7, page 64.

Colombia

Teledensity in Colombia is slightly lower than average for Latin America, and has been decreasing since 2003, with customers opting for alternative technologies and mobility in preference to traditional telephony. Colombia has around 30 local telephone providers, partly private, and partly owned by the municipality where they operate. Most of the customer base, however, is served by three companies: Telefónica Telecom (previously Colombia Telecom), Empresa de Telecomunicaciones de Bogotá (ETB), and UNE EPM Telecomunicaciones.

Competition in the telecoms market received a boost in 2007, thanks to a resolution that opened up the long-distance market, as well as a Convergence Decree that set the stage for a single concession licence. Consumer rights regulations were also passed in 2007, based on the most frequent grievances of telecom subscribers. For the country overview, see chapter 8, page 80.

Mexico

Mexico’s fixed-line teledensity is around 19%, about average for Latin America. However, growth in fixed lines has been steadily declining for the past eight years, from 13% in 2000 to negligible growth in 2007. Estimates indicate that teledensity remained stagnant during 2007. In addition, there are significant disparities between urban and rural areas, ranging from 43% teledensity in the Federal District to 6% in the state of Chiapas.

Despite liberalisation, Telmex still dominates the fixed-line market with around 90% of lines. However, competitors such as Maxcom and Axtel are slowly gaining market share in access lines, and Telmex is being compelled to enter interconnection agreements with would-be competitors. In addition, VoIP is rapidly gaining popularity although regulatory restrictions have hampered its full potential. Statements by the Calderon government in November 2007 and the commencement that month of a CFC investigation into the fixed, cellular and broadband sectors, offer some hope that Mexican telco markets will become more open to competition in the near future. For the country overview, see chapter 19, page 149.

Peru

Peru’s teledensity is among the lowest in Latin America, underdeveloped even taking into account the country’s low GDP per capita. The telecom infrastructure reflects the country’s poverty map, with most of the fixed lines concentrated in Lima. The government aims to bridge the digital divide through rural projects sponsored by FITEL, a fund that finances rural operators under the rule of less-bid subsidy. Competition is strongly encouraged, and a single telecoms concession regime was adopted in January 2007, facilitating the process of licensing and convergence. Mobile Number Portability has been made compulsory for all operators from 2010.

Despite liberalisation, Peru’s local fixed-line market is still dominated by the incumbent Telefónica del Perú. Movistar, also owned by Telefónica, occupies the number two position in basic telephony with its fixed wireless service. As a result, Telefónica controls around 98% of Peru’s local fixed-line market. Long-distance telephony, on the other hand, is very competitive, stimulated by a multicarrier system. Although teledensity is gradually increasing, many rural municipalities still have no telephone facilities. The government is aiming to increase fixed-line teledensity from 9% to 12% by 2011. For the country overview, see chapter 23, page 186.

Venezuela

Venezuela’s fixed-line teledensity is only about average for Latin America – a poor performance based on the country’s GDP per capita, which is one of the region’s highest. In 2007, however, Venezuela’s fixed-lines in service grew at a faster rate than those of most other Latin American countries, as its renationalised incumbent CANTV rolled out lines in underserviced areas while cutting interconnection charges and call fees. The Venezuelan government gained control of CANTV in May 2007 with an 86.2% stake, which comprised: 6.6% that it already owned; 28.5% that it purchased from Verizon; and 51.1% that it purchased through concurrent share offers on the New York and Caracas stock exchanges.

Besides CANTV, another four telcos offer basic telephony using fixed-wireless or cable TV networks, and another nine offer international long-distance telephony. VoIP, as a cheap option for long-distance calling, has gained a strong foothold in Venezuela. For the country overview, see chapter 27, page 216.

For those needing high-level strategic information and objective analysis on the regulatory developments and fixed-line markets in Latin America, this report is essential reading and gives further information on:

• Government policies affecting the telecom industry;
• Amendments to the telecom laws and regulations in the various countries;
• Privatisation and liberalisation issues;
• Alternative technologies such as VoIP and WLL.

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